When does budgeted fixed overhead differ from applied fixed overhead? (Assume the number of machine hours is the activity base.)
A) During any period in which the number of standard machine hours allowed differs from the budgeted or planned activity level.
B) It always differs.
C) During any period in which actual overhead costs exceed planned overhead costs.
D) During any period in which budgeted production equals planned production.

Question

Quizplus · Accepted Answer

Budgeted fixed overhead is based on a predetermined level of activity, which is usually measured in machine hours. If the actual number of machine hours used differs from the budgeted level of machine hours, then the budgeted fixed overhead will differ from the applied fixed overhead. In other words, if the company does not use the expected amount of machine hours, then the budgeted fixed overhead will not match up with the actual fixed overhead applied to production.

When Does Budgeted Fixed Overhead Differ from Applied Fixed Overhead