Answer (C) is correct . The volume variance is the difference between total budgeted fixed overhead and total fixed overhead absorbed (applied). It is a measure of the use of capacity, not of the difference between budgeted and actual costs. However, the spending variance is the difference between actual overhead incurred and the flexible budget amount for the actual input. In four-way analysis of overhead variances, the spending variance is divided into fixed and variable components. Consequently, the components of the spending variance, not the volume variance, are useful in detecting short-term problems in the control of overhead costs.
Answer (A) is incorrect because The spending variance, not the volume variance, is useful in detecting short-term problems in the control of overhead costs.
Answer (B) is incorrect because The spending variance, not the volume variance, is useful in detecting short-term problems in the control of overhead costs.
Answer (D) is incorrect because The spending variance, not the volume variance, is useful in detecting short-term problems in the control of overhead costs.
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