Smithville uses labour hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?

Question

Quizplus · Accepted Answer

If the workers were very inefficient, they would likely take more labour hours than expected to complete the production, resulting in a higher variable overhead cost than budgeted. Therefore, the variable-overhead efficiency variance would be unfavourable. The nature of the variance cannot be determined based on the facts provided, and there is no direct relationship between the variable overhead efficiency variance and the labour efficiency variance or fixed overhead volume variance.

Smithville Uses Labour Hours to Apply Variable Overhead to Production