The variance that captures the effect of efficient use of the activity base on the cost of variable overhead is the
A)Variable overhead spending variance.
B)Variable overhead efficiency variance.
C)Variable overhead volume variance.
D)None of these ans choices are correct.

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance captures the effect of using the activity base more or less efficiently than expected on the cost of variable overhead. This variance is computed as the difference between the actual quantity of activity used and the standard quantity of activity allowed, multiplied by the standard variable overhead rate. The variable overhead spending variance captures the effect of the difference between actual variable overhead costs and budgeted variable overhead costs, while the variable overhead volume variance captures the effect of the difference between actual activity usage and budgeted activity usage on the cost of variable overhead. None of these variances directly capture the effect of efficient use of the activity base on the cost of variable overhead.

The Variance That Captures the Effect of Efficient Use of the Activity