A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours.A fixed manufacturing overhead volume variance will necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.

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Quizplus · Accepted Answer

This statement is true. The fixed manufacturing overhead volume variance occurs when the actual production volume differs from the budgeted volume, resulting in a difference in fixed manufacturing overhead applied to products based on standard hours allowed. The variance is calculated by multiplying the difference between the actual and budgeted volume by the budgeted fixed overhead rate per direct labor hour.

A Company Has a Standard Cost System in Which Fixed