Question

The volume variance is computed as:

A. the addition of budgeted overhead and standard overhead applied
B. the difference between budgeted overhead and actual total overhead
C. the difference between budgeted overhead and standard overhead applied

Answer 1

The correct answer is option C. Volume variance is computed as the difference between budgeted overhead and standard overhead applied, which is essential in financial management for measuring performance.

Step-by-step explanation:

The question pertains to the calculation of volume variance, which in managerial accounting is a measure used to gauge the efficiency of production. Volume variance is calculated as the difference between budgeted overhead and standard overhead applied. This is not merely an addition of values but specifically requires the computation of a differential quantity, highlighting the cost management aspect within a production environment.

The correct option for volume variance computation is C: the difference between budgeted overhead and standard overhead applied. Variance analysis is a crucial tool for financial management, as it aids in measuring performance and identifying areas where the company may not be meeting financial expectations.