Answer (C) is correct . In two-way analysis, the total overhead variance (fixed + variable) is composed of the volume variance (total fixed overhead cost budgeted – fixed overhead applied based on standard input allowed for the actual output) and the controllable (budget) variance (the difference between the total actual overhead and the volume variance). Consequently, the controllable (budget) variance contains both fixed and variable elements.
Answer (A) is incorrect because The volume variance consists of fixed overhead only, and the efficiency variance, which consists of variable overhead only, is not isolated in two- way analysis.
Answer (B) is incorrect because The volume variance consists of fixed overhead only.
Answer (D) is incorrect because The volume variance consists of fixed overhead only, and the efficiency variance, which consists of variable overhead only, is not isolated in two- way analysis.
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