The fixed overhead budget variance can be broken down into two parts: the spending variance and the production volume variance.

Question

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The fixed overhead budget variance can be analyzed into two variances: spending variance and production volume variance. The spending variance arises due to the differences in actual and budgeted fixed overhead cost rates, while the production volume variance occurs because of differences in the actual number of units produced and the budgeted number of units for fixed overhead allocation.

The Fixed Overhead Budget Variance Can Be Broken Down into Two