Question

31. The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is the:

A. sum of the spending and efficiency variances.

B. controllable variance.

C. efficiency variance.

D. spending variance.

E. volume variance.

Answer 1

The difference between budgeted fixed manufacturing overhead and the applied fixed overhead is the volume variance. This occurs because the fixed costs or overhead is spread out over the number of units produced, which affects the average fixed cost per unit. A $1,000 fixed cost spread out results in a hyperbolic average fixed cost curve.

Step-by-step explanation:

The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is known as the volume variance.

Fixed costs are costs that do not change with the level of production, also known as overhead. An example might be the rent for a factory, which remains constant whether a lot or a little is produced.

If we suppose that the fixed cost is $1,000 and divide this by the quantity of output produced, we get the average fixed cost.

The average fixed cost curve is typically a hyperbola because as production increases, the fixed cost is spread over more units, decreasing the cost per unit.

This concept of spreading the overhead means that the larger the quantity of output, the lower the average fixed cost per unit would be, since the fixed cost is being allocated over a greater number of units.

Answer 2

The difference between budgeted fixed manufacturing overhead and the fixed overhead applied to production is the spending variance.

The answer is option ⇒d

Step-by-step explanation:

The spending variance is the difference between the actual fixed manufacturing overhead costs incurred and the budgeted fixed manufacturing overhead costs. It represents the variation in costs due to factors such as price changes or unexpected expenses.

For example, if the budgeted fixed manufacturing overhead costs were $10,000 and the actual costs incurred were $11,000, the spending variance would be $1,000.

The answer is option ⇒d