Dori Castings is a job order shop that uses a standard cost system to account for its production costs. Manufacturing overhead costs are applied to production on the basis of direct labour hours.
-A volume variance will exist for Dori in a month under which of the following conditions?
A) When the production volume differs from sales volume.
B) When the actual direct labour hours differ from standard hours allowed.
C) When there is a budget variance in fixed overhead costs.
D) When the fixed overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed overhead.

Question

Quizplus · Accepted Answer

A volume variance in a standard cost system, especially in the context of manufacturing overhead costs, occurs when the fixed overhead applied to units of product based on standard hours allowed differs from the budgeted fixed overhead. This variance reflects the difference between the expected (budgeted) level of activity and the level of activity actually achieved.

Dori Castings Is a Job Order Shop That Uses a Standard