ECONOMICS

Detailed explanation-1: -A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor hours. A fixed manufacturing overhead volume variance will necessarily occur in a month in which there is a fixed manufacturing overhead budget variance. a. True.

Detailed explanation-2: -Viger Corporation has a standard cost system in which it applies manufacturing overhead to products on the basis of standard machine-hours (MHs).

Detailed explanation-3: -Variable manufacturing overhead is applied to products on the basis of standard direct labor hours.

Detailed explanation-4: -The statement is TRUE. Suppose, for example, a company uses direct labor hours as its overhead application activity. The standard says that each unit should use 1.5 direct labor hours and the company manufactured 100, 000 units using 140, 000 direct labor hours.

Detailed explanation-5: -Variable overhead tends to be small in relation to the amount of fixed overhead. Since it varies with production volume, an argument exists that variable overhead should be treated as a direct cost and included in the bill of materials for products.