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Home Q & A Board Other Fields Homework Help Business Accounting
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jerico jerico
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Posts: 4603
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9 years ago
Abby Company has just implemented a new cost accounting system that provides two variances for fixed manufacturing overhead. While the company's managers are familiar with the concept of spending variances, they are unclear as to how to interpret the production-volume overhead variances. Currently, the company has a production capacity of 54,000 units a month, although it generally produces only 46,000 units. However, in any given month the actual production is probably something other than 46,000.

Required:

a.   Does the production-volume overhead variance measure the difference between the 54,000 and 46,000, or the difference between the 46,000 and the actual monthly production? Explain.

b.   What advice can you provide the managers that will help them interpret the production-volume overhead variances?
Textbook 
Cost Accounting

Cost Accounting


Edition: 14th
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cyborgcyborg
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9 years ago
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jerico Author
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#2
9 years ago
This solved my problem perfectly, thank you for your kind input.
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#3
9 years ago
I'm happy to help you, how luck with the others, I noticed you've posted a lot of questions.
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