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.The company's choice of the denominator level of activity has no effect on the fixed manufacturing overhead budget variance.

Question

Quizplus · Accepted Answer

The fixed manufacturing overhead budget variance is based on the difference between the actual fixed manufacturing overhead costs incurred and the budgeted fixed manufacturing overhead costs. Since the budgeted fixed manufacturing overhead costs remain the same regardless of the denominator level used to apply overhead costs, the choice of denominator level does not affect the fixed manufacturing overhead budget variance.

A Company Has a Standard Cost System in Which Fixed