EJB Company used a "normal" production level of 10,000 units to determine the standard per-unit cost of manufacturing overhead.Which of the following is not true?
A)There is no overhead volume variance for a given month if actual production that month is 10,000 units.
B)When actual production exceeds 10,000 units,use of standard costs results in a favorable overhead volume variance.
C)When actual production is less than 10,000 units,use of standard costs results in an unfavorable total overhead variance.
D)Overhead variances arising as a result of producing more or less than 10,000 units do not indicate either strong or poor performance by the Production Department.

Question

Quizplus · Accepted Answer

Option C is not true because a decrease in actual production below the normal level of 10,000 units could result in an unfavorable overhead volume variance, but it does not necessarily result in an unfavorable total overhead variance. The total overhead variance considers both the volume variance and the efficiency and spending variances, which could offset the unfavorable volume variance.

EJB Company Used a "Normal" Production Level of 10,000 Units