Required a does the production volume overhead

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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?
Answer:
Diff: 2 Type: ES
CPA Competencies: Chapter 8 -
3.2.1 Develops or evaluates information inputs for operational plans, budgets, and forecasts,
3.2.2 Prepares, analyzes, or evaluates operational plans, budgets, and forecasts,
3.2.3 Computes, analyzes, or assesses implications of variances,
3.4.1 Evaluates sources and drivers of revenue growth
Skill: Understanding
Objective: LO 8-1
57) What are the arguments for prorating a production-volume variance that has been deemed to be
material among work-in-process, finished goods, and cost of goods sold, as opposed to writing it all off to
cost of goods sold?