When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.
A) unfavorable variable overhead spending variance
B) favorable variable overhead efficiency variance
C) unfavorable fixed overhead flexible-budget variance
D) favorable production-volume variance

Question

Quizplus · Accepted Answer

When leasing costs for equipment unexpectedly increase, it is an increase in fixed overhead costs. Since machine-hours are used as the overhead cost-allocation base, this would lead to an unfavorable fixed overhead flexible-budget variance.

When Machine-Hours Are Used as an Overhead Cost-Allocation Base and Annual