Use the following to answer questions:
Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow:

-What are the fixed overhead efficiency and volume variances, respectively?
A) $160,000 favorable; $201,000 favorable;
B) $160,000 unfavorable; $201,000 unfavorable
C) $0; $200,000 favorable
D) There is never an efficiency variance for fixed overhead; $200,000 unfavorable

Question

Use the following to answer questions:
Controller Rachel Tabak of Johnson Inc. is in the process of analyzing its manufacturing overhead costs for March. March results follow:
 
-What are the fixed overhead efficiency and volume variances, respectively?
A) $160,000 favorable; $201,000 favorable; 
B) $160,000 unfavorable; $201,000 unfavorable 
C) $0; $200,000 favorable 
D) There is never an efficiency variance for fixed overhead; $200,000 unfavorable

Quizplus · Accepted Answer

Fixed overhead efficiency variance does not exist because fixed overhead costs are not supposed to vary with the level of production efficiency. The volume variance indicates whether the actual production volume differed from the expected (budgeted) production volume, which can result in a favorable or unfavorable variance depending on the actual production levels compared to the budgeted levels.

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