When variable overhead efficiency variance is favorable, it can be safely assumed that the ________.
A) actual rate per unit of the cost-allocation base is higher than the budgeted rate
B) actual quantity of the cost-allocation base used is higher than the budgeted quantity
C) actual rate per unit of the cost-allocation base is lower than the budgeted rate
D) actual quantity of the cost-allocation base used is lower than the budgeted quantity

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance measures the difference between the actual quantity of the cost-allocation base used and the budgeted quantity of the cost-allocation base allowed for the actual output of the period. A favorable variance indicates that less of the cost-allocation base than budgeted was used to produce the actual level of output. As a result, actual quantity of the cost-allocation base used is lower than the budgeted quantity.

When Variable Overhead Efficiency Variance Is Favorable, It Can Be