The difference between actual capacity used and budgeted capacity is called:
A)Direct labour efficiency variance
B)Fixed overhead efficiency variance
C)Variable overhead efficiency variance
D)Production volume variance

Question

Quizplus · Accepted Answer

The difference between actual capacity used and budgeted capacity is called production volume variance. This variance measures the impact of operating at a level different from the budgeted level on the fixed costs of a company. It is important in helping companies understand the effects of changes in production volume on their costs and profitability. The other options listed are efficiency variances, which measure the difference between actual and budgeted amounts for a specific cost item related to labor or overhead expenses.

The Difference Between Actual Capacity Used and Budgeted Capacity Is