An unfavorable fixed overhead volume variance is most often caused by
A)actual fixed overhead incurred exceeding budgeted fixed overhead.
B)an over-application of fixed overhead to production.
C)an increase in the level of the finished inventory.
D)normal capacity exceeding actual production levels.

Question

Quizplus · Accepted Answer

An unfavorable fixed overhead volume variance occurs when actual production levels are lower than normal capacity. This means that fixed overhead costs are spread over a lower level of output, resulting in a higher fixed overhead cost per unit of output. This can happen, for example, if there is a decrease in demand or if there are production inefficiencies that result in lower production levels. A, B, and C are not likely causes of an unfavorable fixed overhead volume variance.

An Unfavorable Fixed Overhead Volume Variance Is Most Often Caused