If a company uses a predetermined rate for absorbing manufacturing overhead, the volume variance is the: Group of answer choices a. Underapplied or overapplied variable cost element of overhead. b. Underapplied or overapplied fixed cost element of overhead. c. Difference in budgeted costs and actual costs of fixed overhead items. d. Difference in budgeted costs and actual costs of variable overhead items.

Question

Gianni Brooks

Business

6 June, 18:53

If a company uses a predetermined rate for absorbing manufacturing overhead, the volume variance is the: Group of answer choices a. Underapplied or overapplied variable cost element of overhead. b. Underapplied or overapplied fixed cost element of overhead. c. Difference in budgeted costs and actual costs of fixed overhead items. d. Difference in budgeted costs and actual costs of variable overhead items.

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Emilia Patton · Answer 1

Answer: c. Difference in budgeted costs and actual costs of fixed overhead items.

Explanation:

If a company uses a Predetermined rate for Manufacturing Overhead this means that they have budgeted a certain cost of overhead that they believe will be sufficient for production. This is usually possible for fixed overhead items.

The Variance therefore would be the difference between this budgeted figure and the actual figure for the fixed Overhead items.