Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead costs are applied on the basis of standard direct labor-hours. A volume variance will exist for Dori in a month where:
A)production volume differs from sales volume.
B)actual direct labor-hours differ from standard hours allowed.
C)there is a budget variance in fixed manufacturing overhead costs.
D)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

A volume variance occurs when the fixed manufacturing overhead applied to units of product based on standard hours allowed differs from the budgeted fixed manufacturing overhead. This variance arises because the actual production volume differs from the expected production volume used to set the budget.

Dori Castings Is a Job Order Shop That Uses a Standard