In a standard costing system where the denominator activity for the predetermined overhead rate is labour-hours, overhead costs are applied to work in process on the basis of actual hours worked

Question

Quizplus · Accepted Answer

In a standard costing system, where the predetermined overhead rate is based on labour-hours, the overhead costs are applied to work in process based on the standard hours allowed for the actual output achieved. Therefore, the fixed overhead budget variance is the difference between actual fixed overhead costs and budgeted fixed overhead costs, and the fixed overhead volume variance is the difference between budgeted fixed overhead costs and fixed overhead applied based on standard hours allowed for actual output achieved.

In a Standard Costing System Where the Denominator Activity for the Predetermined