The manufacturing overhead variance that is a measure of capacity utilization is:
A) the overhead rate variance.
B) the overhead efficiency variance.
C) the overhead budget variance.
D) the overhead volume variance.

Question

Quizplus · Accepted Answer

The overhead volume variance measures the difference between the actual overhead costs incurred and the budgeted overhead costs based on the standard hours allowed for the actual output. It reflects whether the actual level of output utilized the available capacity effectively or not. Therefore, it is a measure of capacity utilization. The other options, i.e., overhead rate variance, overhead efficiency variance, and overhead budget variance relate to different aspects of overhead costs and do not specifically measure capacity utilization.

The Manufacturing Overhead Variance That Is a Measure of Capacity