Skip to content

CA Intermediate · Cost and Management Accounting · Standard Costing

In a standard costing system, the fixed overhead volume variance arises because of the difference between:

Fixed overhead volume variance is the difference between fixed overheads absorbed on actual output at the standard rate and the budgeted fixed overheads. It reflects over- or under-absorption because production volume differed from the budget, unlike the expenditure variance, which compares budgeted and actual spending.

  1. ABudgeted fixed overheads and actual fixed overheads
  2. BAbsorbed fixed overheads (standard rate x actual output) and budgeted fixed overheadsCorrect
  3. CActual fixed overheads and absorbed fixed overheads based on actual hours
  4. DStandard hours for actual output and actual hours worked, at the standard rate

Explanation

Fixed overhead volume variance = absorbed overhead (standard rate x actual output) minus budgeted overhead. It shows under- or over-absorption caused by output differing from budget. Option A is the expenditure variance. Option D is the efficiency variance component.

Did you get it right without looking?

One question tells you little. A timed set on Standard Costing shows your real accuracy, how long you take and where you lose marks.

Practise Standard CostingFree diagnostic mock

More Standard Costing questions