Fixed overhead costs are not expected to vary with production volumes. Therefore, production volume variances
A) Do not exist in most organisations
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

Production volume variances exist because the overhead allocation rate is based on estimated production volumes, and actual production can differ from these estimates.

Fixed Overhead Costs Are Not Expected to Vary with Production