LO 8.4The fixed factory overhead variance is caused by the difference between which of the following?

actual and standard allocation base

actual and budgeted units

actual fixed overhead and applied fixed overhead

actual and standard overhead rates

The fixed factory overhead variance is the difference between actual fixed overhead and applied fixed overhead.

The correct answer is C

Explanation:

The fixed factory overhead variance is the difference between applied fixed overhead and actual overhead. The applied fixed overhead is calculated as fixed overhead application rate multiplied by actual activity level. The fixed overhead application rate is the ratio of budgeted overhead to budgeted activity level.

Answer: The correct answer is "actual fixed overhead and applied fixed overhead".

Explanation: The fixed factory overhead variance is caused by the difference between actual fixed overhead and applied fixed overhead.

There are two types of variations, one is produced because it determines whether too much or too little is spent on fixed overhead; and the other is produced because the real production can be higher or lower than the expected level.