Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the
A) fixed factory overhead volume variance
B) direct labor time variance
C) direct labor rate variance
D) variable factory overhead controllable variance

Question

Quizplus · Accepted Answer

The fixed factory overhead volume variance measures the cost of available but unused productive capacity, since it compares the expected fixed overhead cost based on full capacity to the actual fixed overhead cost incurred for the actual level of production. If the actual level of production is less than full capacity, the fixed factory overhead volume variance will be unfavorable, indicating that the company incurred fixed overhead costs for unused capacity.

Assuming That the Standard Fixed Overhead Rate Is Based on Full