In a Standard Costing System,underapplied or Overapplied Fixed Manufacturing Overhead

question 103

True/False

In a standard costing system,underapplied or overapplied fixed manufacturing overhead is equal to the sum of the fixed manufacturing overhead budget variance and the fixed manufacturing overhead volume variance.

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Definitions:

Fixed Manufacturing Overhead

The consistent, non-variable costs incurred during the manufacturing process, not directly tied to production levels.

Volume Variance

The difference between the budgeted and actual volume of production, affecting fixed costs allocation.

Machine-Hours

A unit of measure representing the operation time of a machine, often used in allocating manufacturing costs based on machine usage.

Fixed Overhead Volume Variance

The difference between the budgeted fixed overhead and the applied fixed overhead, which is attributed to the variance in the volume of production.