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 actual direct labor-hours differ from standard hours allowed.

2) A fixed manufacturing overhead budget variance occurs as the result of a difference between the denominator level of activity (in hours) and the standard hours allowed for the actual output of the period.

3) Since sales dollars represents "ability to pay," it is superior to most other bases used for allocating or charging service department costs.

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