Fixed overhead costs are not expected to vary with production volumes. Therefore, production volume variances:
A) Do not exist in most organizations
B) Exist only if production volume is higher than anticipated
C) Exist only if production volume is lower than expected
D) Exist because of estimates in the calculation of the overhead allocation rate

Question

Quizplus · Accepted Answer

Fixed overhead production volume variances exist because of the estimates used in calculating the overhead allocation rate. These variances occur when the actual production volume differs from the expected (or standard) production volume used to calculate the overhead rate, affecting how overhead costs are allocated to products.

Fixed Overhead Costs Are Not Expected to Vary with Production