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 efficiency 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 efficiency variance for variable overhead costs means that the actual amount of overhead allocated to each unit of output was higher than the budgeted amount. This could be due to using more direct labor hours than budgeted, which would increase the overhead allocation per unit. Therefore, the best choice is D, as the actual number of direct labor hours was higher than the budgeted hours.

Quality Brand Products Uses Standard Costing to Manage Their Direct