Quality Brand Products uses standard costing to manage their direct costs and their overhead costs. Overhead costs are allocated based on direct labor hours. In the first quarter, Quality Brand had an unfavorable cost variance for their variable overhead costs. Which of the following scenarios would be a reasonable explanation for that variance?
A)The actual number of direct labor hours was lower than the budgeted hours.
B)The actual variable overhead costs were higher than the budgeted costs.
C)The actual variable overhead costs were lower than the budgeted costs.
D)The actual number of direct labor hours was higher than the budgeted hours.

Question

Quizplus · Accepted Answer

An unfavorable cost variance for variable overhead means the actual variable overhead cost incurred is higher than the budgeted cost. This could be due to factors such as higher energy costs, higher maintenance costs, or higher usage of indirect materials. The actual number of direct labor hours being lower or higher than budgeted hours would not directly affect the variable overhead cost.

Quality Brand Products Uses Standard Costing to Manage Their Direct