[whopper]

I’ve been using Yaeger for studying and do not recall any questions regarding the topic of ‘denominator activity’ and variances. So, when I came across the following question today, I felt lost. Can anyone please explain?

Q. What happens if you erroneously select a high level activity for the denominator?

A. There is an unfavorable OH Volume Variance.

My Question – How is an unfavorable OH Volume Variance possible? The standard rate is computed as budget denominator cost/denominator activity level. This same rate is applied to the actual and standard volume to determine the variance. So, if the same rate is used, how would this create the variance? It seems the difference between the actual versus standard volume would be the factor determining the variance.

I hope my question makes sense. I’m thoroughly confused on the answer to this question. Thank you in advance.

REG - 89, 04/29/13
BEC - 81, 08/06/13
FAR - 84, 12/19/13
AUD - 82, 10/05/13

[Anonymous]

my friend u are forgetting the budgeted fixed o/h component that causes the variance

[Author]

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