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 has no effect on the fixed manufacturing overhead budget variance.

Question

Quizplus · Accepted Answer

The fixed manufacturing overhead budget variance is not affected by the denominator level of activity in a standard cost system because fixed overhead costs remain the same regardless of the level of production. Only the variable overhead costs would be affected by changes in the level of activity.

A Company Has a Standard Cost System in Which Fixed