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The Fixed Overhead Volume Variance Shows Why the Fixed Overhead

question 67

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The fixed overhead volume variance shows why the fixed overhead is underallocated or overallocated because it is a volume variance.


Definitions:

Net Present Value

It's the calculation of the present value of all cash entering minus the present value of all cash exiting over a certain period.

Sales Quantity

The total number of units sold within a specific period.

Discounted Payback Period

The period of time it takes for an investment's cash flows, discounted back to the present value, to cover its initial cost.

Degree of Operating Leverage

A financial metric that measures how a change in sales volume will affect a company's operating income due to fixed and variable costs.

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