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Financial & Managerial Accounting
Found in: Page 967
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Google monitors its fixed overhead. In an analysis of fixed overhead cost variances, what is the volume variance?

The differences in the actual cost obtained from the actual production is termed overhead volume variance.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Fixed Cost

In accounting, the term fixed cost denotes the expenses that are independent or not dependent on production level. Such costs remain the same for all production levels and are not directly associated with the manufacturing process.

Step 2: Volume variance in fixed overhead cost variance

The expenses incurred by a business entity for a definite production level are termed overhead costs. It includes variable and fixed expenses that facilitate drafting a flexible budget. The actual fixed overhead cost differences obtained from the actual product produced during a particular period state the overhead volume variance.

Most popular questions for Business-studies Textbooks

Presented below are terms preceded by letters a through j and a list of definitions 1 through 10. Enter the letter of the term with the definition, using the space preceding the definition.

  1. Fixed budget

1. The difference between actual and budgeted sales or cost caused by the difference between the actual price per unit and the budgeted price per unit.

  1. Standard costs

2. A planning budget based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume.

  1. Price variance

3. Preset costs for delivering a product, component, or service under normal conditions.

  1. Quantity variance

4. A process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amounts that resulted from price and quantity differences.

  1. Volume variance

5. The difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate.

  1. Controllable variance

6. A budget prepared based on predicted amounts of revenues and expenses corresponding to the actual level of output.

  1. Cost variance

7. The difference between actual and budgeted cost caused by the difference between the actual quantity and the budgeted quantity.

  1. Flexible budget

8. The combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance.

  1. Variance analysis

9. A management process to focus on significant variances and give less attention to areas where performance is close to the standard.

  1. Management by exception

10. The difference between actual cost and standard cost, made up of a price variance and a quantity variance.

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