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.A fixed manufacturing overhead volume variance will necessarily occur in a month in which the fixed manufacturing overhead applied to units of product on the basis of standard hours allowed differs from the budgeted fixed manufacturing overhead.

Question

Quizplus · Accepted Answer

The statement is correct. The fixed manufacturing overhead volume variance occurs when the actual hours worked differ from the standard hours allowed, causing the fixed overhead applied to units to differ from the budgeted amount.

A Company Has a Standard Cost System in Which Fixed