Under absorption costing, the magnitude for favorable volume production variance is affected by the choice of _________?
Correct answer: D. denominator level
- A. unplanned level
- B. budgeting level
- C. numerator level
- D. denominator level
Explanation
The fixed manufacturing overhead rate uses budgeted fixed cost divided by the denominator level, such as normal or practical capacity. Changing that denominator changes the resulting volume production variance.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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