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 NOT 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.

Question

Quizplus · Accepted Answer

A fixed manufacturing overhead volume variance will occur if there is a difference between the budgeted fixed manufacturing overhead and the fixed manufacturing overhead applied based on standard hours allowed, as this variance reflects the difference in expected and actual production levels.

A Company Has a Standard Cost System in Which Fixed