Which of the following is the result of fixed overhead being made up of many items?
A)The fixed overhead spending variance is not meaningful.
B)It is not possible to calculate a fixed overhead volume variance.
C)The fixed overhead volume variance will always be unfavourable.
D)A line-by-line comparison of budgeted costs with actual costs provides more information.

Question

Quizplus · Accepted Answer

When fixed overhead is made up of many items, it becomes difficult to analyze the impact of each item on the variance. Therefore, a line-by-line comparison of budgeted costs with actual costs provides more information and insight into the causes of the variance. Option A is not correct as the fixed overhead spending variance can still be meaningful in identifying significant deviations from the budgeted amounts. Option B is not correct as it is still possible to calculate the fixed overhead volume variance. Option C is not correct as the fixed overhead volume variance can be favorable or unfavorable depending on the actual level of production compared to the budgeted level.

Which of the Following Is the Result of Fixed Overhead