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Unformatted text preview: volume of production and the predetermined fixed overhead rate. • Thus, the difference in budgeted and applied fixed overhead is due to the difference in expected and actual production volume. 5 Formula for Volume Variance Volume Variance = Budgeted Fixed Overhead – Applied Fixed Overhead Volume Variance = (Expected volume x Predetermined fixed overhead rate) – (Actual volume x Predetermined fixed overhead rate) OR Volume Variance = (Expected volume – Actual volume) x Predetermined fixed overhead rate OR 6 Interpretation of Volume Variance • We cannot interpret the volume variance as favorable or unfavorable because: 1. The variance is caused by a difference in actual and expected volume of production and 2. We would need to know why the company produced more or less units than expected....
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 Spring '08
 CMEasterwood
 Accounting, Variance, Probability theory, probability density function, Cauchy distribution

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