ObjectiveMcq
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Which of the following variances would be shown in an operating statement prepared under a standard marginal costing system?
(i) Variable overhead expenditure variance
(ii) Variable overhead efficiency variance
(iii) Fixed overhead expenditure variance
(iv) Fixed overhead volume variance
Correct Answer: C — (i), (ii) and (iii)
Correct Answer: C
Explanation:
The fixed overhead volume variance represents the over- or under-absorption of overheads caused by a change in production volume. This variance cannot arise in a standard marginal costing system because marginal costing does not absorb fixed overheads into product costs — fixed overheads are treated as period costs and expensed in full. The fixed overhead volume variance only arises under absorption costing.
Therefore, variances (i), (ii) and (iii) are shown in a marginal costing operating statement, but (iv) is not.