A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. The company's choice of the denominator level of activity affects the fixed manufacturing overhead budget variance.

Question

Quizplus · Accepted Answer

The denominator level of activity affects the fixed manufacturing overhead volume variance, not the budget variance. The budget variance is the difference between actual and budgeted fixed overhead costs, which is not influenced by the denominator level.

A Company Has a Standard Cost System in Which Fixed