The fixed overhead volume variance always shows underallocated fixed overhead costs.

Question

Quizplus · Accepted Answer

The fixed overhead volume variance compares the budgeted fixed overhead costs to the actual fixed overhead costs that were incurred due to a change in the number of units produced. It shows the difference between the budgeted fixed overhead costs and the fixed overhead costs that would have been incurred if the actual number of units produced matched the budgeted number of units. This variance can be either favorable or unfavorable, and it does not necessarily indicate underallocations of fixed overhead costs.

The Fixed Overhead Volume Variance Always Shows Underallocated Fixed Overhead