The fixed overhead application rate is a function of a predetermined activity level.If standard hours allowed for good output equal the predetermined activity level for a given period,the volume variance will be
A)zero.
B)favorable.
C)unfavorable.
D)either favorable or unfavorable,depending on the budgeted overhead.

Question

Quizplus · Accepted Answer

If the standard hours allowed for good output equal the predetermined activity level, then the actual overhead cost should be equal to the budgeted overhead cost, which means there should be no difference between budgeted and actual overhead costs, and therefore no volume variance.

The Fixed Overhead Application Rate Is a Function of a Predetermined