A ﬁxed-overhead volume variance would normally arise when:
A)actual hours of activity coincide with actual units of production.
B)budgeted ﬁxed overhead is less than (or greater than) applied ﬁxed overhead.
C)there is a ﬁxed-overhead budget variance.
D)actual ﬁxed overhead exceeds budgeted ﬁxed overhead.
E)there is a variable-overhead eﬃciency variance.

Question

Quizplus · Accepted Answer

A fixed-overhead volume variance occurs when the actual level of activity is different (greater or less) than the budgeted level of activity. In other words, if the budgeted fixed overhead is based on a certain level of production activity and the actual production activity is different, there will be a fixed-overhead volume variance. This variance arises due to the under or over absorption of fixed overheads, which is caused by the changes in the level of activity. Therefore, option B is the correct choice.

A ﬁXed-Overhead Volume Variance Would Normally Arise When