Q16RQ - Horngren'S Financial And Managerial Accounting

Question

Question: How is the fixed overhead volume variance different from the other variances?

Step-by-Step Solution

Answer

Answer

The fixed overhead volume variance is different from other variances; first, it is not a flexible variance, and second, it is a volume variance

Step 1 Definition of the variance

The variance is defined as the variation between the planned or the forecasted amount computed by the management of the company and the actual amount. 

 

Step 2 Difference of fixed overhead volume from the other variance

The fixed overhead volume variance is not a flexible budget variance. Still, on the other hand, the fixed overhead cost variance, variable overhead cost variance, and variable overhead efficiency variance are flexible budget variances.

This is volume variance; it is different from cost variance. It shows how allocating fixed costs on a per-unit basis causes a difference between budgeted and allocated fixed costs.