Which one of the following factory overhead variances reflects the effect of deviation in input quantities only if the cost driver for applying variable overhead is a perfect predictor of variable overhead cost?
A) Total variable overhead variance.
B) Variable overhead rate variance.
C) Variable overhead spending variance.
D) Variable overhead flexible-budget variance.
E) Variable overhead efficiency variance.

Question

Quizplus · Accepted Answer

The variable overhead efficiency variance reflects the effect of deviation in input quantities only if the cost driver for applying variable overhead is a perfect predictor of variable overhead cost. This variance measures the difference between the standard quantity of cost driver units that should have been used and the actual quantity of cost driver units used, multiplied by the standard variable overhead rate. Therefore, it only considers the impact of input quantity deviations on variable overhead costs, assuming that the cost driver is a perfect predictor of these costs.

Which One of the Following Factory Overhead Variances Reflects the Effect