Because managers use estimates in calculating overhead allocation rates, they are likely to experience
A) Fixed overhead production volume variances
B) No fixed or variable overhead variances
C) Direct labor price variances
D) Lower than expected profits

Question

Quizplus · Accepted Answer

Using estimates in calculating overhead allocation rates can result in fixed overhead production volume variances, as actual production volume may differ from the estimated volume used to calculate the allocation rate. This can lead to under- or over-applied overhead costs, causing variances in the fixed overhead costs.

Because Managers Use Estimates in Calculating Overhead Allocation Rates, They