Asked by Madeline Lombardo on May 17, 2024
Verified
The formula for computing the overhead volume variance is
A) fixed overhead rate times (actual hours less standard hours allowed) .
B) variable overhead rate times (actual hours less standard hours allowed) .
C) fixed overhead rate times (normal capacity hours less standard hours allowed) .
D) variable overhead rate times (normal capacity hours less standard hours allowed) .
Overhead Volume Variance
A measure used in cost accounting to determine the difference between the allocated overhead costs and the actual overhead costs incurred.
Fixed Overhead Rate
A predetermined rate used to assign fixed overhead costs to cost objects, based on a specific activity level or base.
Normal Capacity Hours
The amount of production capability a company can expect to achieve under normal circumstances over a specific period.
- Attain the skill to determine and understand variances associated with manufacturing overhead costs, particularly controllable and volume variances.
Verified Answer
SH
Stevie HollandMay 19, 2024
Final Answer :
C
Explanation :
The overhead volume variance measures the difference between the standard overhead allowed for the actual production level compared to the standard overhead allowed for the normal capacity level. Choice C reflects this calculation by multiplying the fixed overhead rate by the difference between the normal capacity hours and the standard hours allowed. The other choices do not use the normal capacity level in the calculation.
Learning Objectives
- Attain the skill to determine and understand variances associated with manufacturing overhead costs, particularly controllable and volume variances.