Answer (D) is correct . Most variances are of significance to someone who is responsible for that variance. However, a fixed overhead volume variance is often not the responsibility of anyone other than top management. The fixed overhead volume variance equals the difference between budgeted fixed overhead and the amount applied (standard input allowed for the actual output ¡Á standard rate). It can be caused by economic downturns, labor strife, bad weather, or a change in planned output. Thus, a fixed overhead volume variance resulting from a top management decision to reduce output has fewer behavioral implications than other variances.Answer (A) is incorrect because An unfavorable direct materials quantity variance affects production management and possibly the purchasing function. It may indicate an inefficient use of materials or the use of poor quality materials.
Answer (B) is incorrect because An unfavorable direct labor efficiency variance reflects upon production workers who have used too many hours.
Answer (C) is incorrect because A favorable direct labor rate variance related to hiring is a concern of the human resources function. The favorable rate variance might be more than offset by an unfavorable direct labor efficiency variance or a direct materials quantity variance (if waste occurred).
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