Because managers use estimates in calculating overhead allocation rates, they are likely to experience:
A) Fixed overhead production volume variances
B) No fixed or variable overhead variances
C) Direct labour price variances
D) Lower than expected profits

Question

Quizplus · Accepted Answer

Using estimates in calculating overhead allocation rates can result in fixed overhead production volume variances, as the actual production volume used may differ from the estimated volume used in the calculation. This can lead to over- or under-allocation of overhead costs, resulting in variances that affect profits.

Because Managers Use Estimates in Calculating Overhead Allocation Rates, They