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

Question

Quizplus · Accepted Answer

The fixed overhead volume variance reflects the difference between actual fixed overhead costs and budgeted fixed overhead costs based on the actual production volume. It reveals whether fixed overhead costs were overallocated or underallocated. If the actual production volume is less than the budgeted production volume, the fixed overhead volume variance will be unfavorable, indicating overallocated fixed overhead costs. If the actual production volume is greater than the budgeted production volume, the fixed overhead volume variance will be favorable, indicating underallocated fixed overhead costs.

The Fixed Overhead Volume Variance Always Reveals Underallocated Fixed Overhead