The production -volume overhead variance is favourable when actual outputs exceed the denominator level.

Question

Quizplus · Accepted Answer

The production-volume overhead variance is calculated as the difference between actual overhead costs incurred and overhead costs that would have been incurred at the denominator level. If actual outputs exceed the denominator level, it means that production volume is higher than expected, which would result in lower overhead costs per unit due to economies of scale. This would result in a favourable production-volume overhead variance.

The Production -Volume Overhead Variance Is Favourable When Actual Outputs