Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:
A)favorable.
B)unfavorable.
C)either favorable or unfavorable.
D)zero.

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance measures the difference between the actual hours worked and the standard hours allowed for the production of the actual output, multiplied by the variable overhead rate per hour. If the labor efficiency variance is unfavorable, it means that the actual hours worked exceeded the standard hours allowed, resulting in increased labor costs. This will also result in an unfavorable variable overhead efficiency variance since more hours were worked than anticipated, causing a higher overhead cost.

Variable Manufacturing Overhead Is Applied to Products on the Basis