The fixed factory overhead application rate is a function of a predetermined activity level. If standard hours allowed for actual output equal this predetermined activity level for a given period, the volume variance will be: (CPA adapted)
A) zero.
B) favorable.
C) unfavorable.
D) either favorable or unfavorable, depending on the budgeted overhead.

Question

Quizplus · Accepted Answer

The volume variance is zero when the standard hours allowed for actual output match the predetermined activity level, as there is no difference between the expected and actual activity levels.

The Fixed Factory Overhead Application Rate Is a Function of a Predetermined