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 production volume differs from sales volume.

Question

Quizplus · Accepted Answer

The fixed manufacturing overhead volume variance arises only when the actual production volume differs from the budgeted production volume. The variance compares the fixed overhead cost applied to actual production with the fixed overhead cost that would have been applied to budgeted production. The difference between the two represents the volume variance. If production volume differs from sales volume, it does not necessarily mean that the actual production volume differed from the budgeted production volume, and therefore a fixed manufacturing overhead volume variance may or may not occur.

A Company Has a Standard Cost System in Which Fixed