Fixed overhead costs are not expected to vary with production volumes. Therefore, production volume variances:
A) Are always zero
B) Result from using an allocation rate for fixed overhead
C) Exist only if production volume is higher than anticipated
D) Exist only if production volume is lower than expected

Question

Quizplus · Accepted Answer

Fixed overhead production volume variances result from using a predetermined allocation rate for fixed overhead. This rate is based on an expected level of production, and variances occur when the actual production level differs from the expected level, regardless of whether production is higher or lower than anticipated.

Fixed Overhead Costs Are Not Expected to Vary with Production