The difference between actual volume and budgeted production,multiplied by the fixed overhead rate based on practical capacity,is the
A)Expected (planned)capacity variance.
B)Unexpected (unplanned)capacity variance.
C)Total capacity variance.
D)Volume variance.

Question

Quizplus · Accepted Answer

The difference between actual volume and budgeted production is the volume variance. Multiplying this by the fixed overhead rate based on practical capacity gives the unexpected (unplanned) capacity variance, as it represents the difference between actual fixed overhead costs incurred and the amount that would have been incurred based on the budgeted level of production. The total capacity variance would include both the expected (planned) capacity variance and the unexpected (unplanned) capacity variance. The expected (planned) capacity variance would be the difference between the fixed overhead cost based on the budgeted level of production and the fixed overhead rate based on practical capacity, multiplied by the difference between the practical and budgeted capacity levels.

The Difference Between Actual Volume and Budgeted Production,multiplied by the Fixed