The fixed factory overhead production-volume variance represents:
A) Money lost or gained because of achieved production levels.
B) A result of unitizing fixed overhead costs for product-costing purposes.
C) Information regarding the effectiveness of the organization in meeting sales targets.
D) Information that management can use for cost-control purposes.
E) Important information for companies pursuing a JIT production philosophy.

Question

Quizplus · Accepted Answer

The fixed factory overhead production-volume variance arises because fixed overhead costs that are incurred during a period are unitized for product-costing purposes. The variance measures the difference between the budgeted fixed overhead (based on expected production volume) and the actual fixed overhead incurred (based on actual production volume). It does not reflect money lost or gained or provide information on sales targets or JIT production. However, management can use this variance for cost-control purposes.

The Fixed Factory Overhead Production-Volume Variance Represents