The production-volume variance arises whenever the actual level of the denominator differs from the level used to calculate the budgeted fixed overhead rate.

Question

Quizplus · Accepted Answer

The statement is true. The production-volume variance occurs when the actual level of production differs from the level used to calculate the budgeted fixed overhead rate. This variance arises because fixed overhead costs are applied on a per-unit basis, and if the actual volume differs from the budgeted volume, the applied fixed overhead costs will also differ, resulting in a variance.

The Production-Volume Variance Arises Whenever the Actual Level of the Denominator