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
(i), (ii) and (iv)
(i), (iii) and (iv)
(i), (ii) and (iii)
(ii), (iii) and (iv)
(i) and (iii) only
Answer and explanation
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.