Question

The fixed overhead volume variance is a measure of a. the cost of unused activity capacity acquired. b. the effect of the actual output differing from the output used to calculate the predetermined fixed overhead rate. c. both the effect of the actual output differing from the output used to calculate the predetermined fixed overhead rate and the cost of unused activity capacity. d. both the cost of overspending on fixed overhead items and the effect of the actual output differing from the output used to calculate predetermined fixed overhead rate. e. the cost of overspending on fixed overhead items.

Answer 1

d. both the cost of overspending on fixed overhead items and the effect of the actual output differing from the output used to calculate predetermined fixed overhead rate.

Step-by-step explanation:

Fixed overhead volume variance is a measure of difference between actual fixed overheads applied based to production volume and the budgeted fixed overhead based on production volume. The variance can be favorable or unfavorable. The unfavorable variance indicates that the fixed overheads actually applied based on production volume are less than budgeted fixed overhead cost based on production volume.