Assuming that the standard fixed overhead rate is based on full capacity, the cost of available but unused productive capacity is indicated by the:
A) factory overhead cost volume variance
B) direct labor cost time variance
C) direct labor cost rate variance
D) factory overhead cost controllable variance

Question

Quizplus · Accepted Answer

The factory overhead cost volume variance represents the difference between the actual fixed overhead cost incurred and the budgeted fixed overhead cost at full capacity. If full capacity is not being utilized, then the actual fixed overhead cost will be less than the budgeted amount, resulting in a favorable variance. This indicates that some productive capacity was available but unused, therefore the cost of this unused capacity is reflected in the factory overhead cost volume variance.

Assuming That the Standard Fixed Overhead Rate Is Based on Full