Answer (C) is correct . The production volume variance (also called an idle capacity variance) is a component of the total overhead variance. It is the difference between budgeted fixed costs and the product of the standard fixed cost per unit of input times the standard units of input allowed for the actual output. Thus, the production volume variance equals under- or overapplied fixed overhead. This variance results when actual activity differs from the activity base used to calculate the fixed overhead application rate.
Answer (A) is incorrect because The direct labor efficiency variance relates to inefficient or efficient use of direct labor hours.
Answer (B) is incorrect because The variable overhead efficiency variance relates to efficient or inefficient use of variable overhead.
Answer (D) is incorrect because The volume variance is related to overhead application, not direct labor.
|
