During the middle of the fiscal year, AWR Corporation unexpectedly revised its estimate of a plant asset's life from 5 years to 7 years. That revision is most likely to lead to:
A) No variance, since the plant asset's cost is sunk
B) Fixed overhead spending variance
C) Fixed overhead production volume variance
D) Variable overhead spending variance

Question

Quizplus · Accepted Answer

The revision in the estimate of the plant asset's life will lead to a change in the depreciation expense and therefore, a fixed overhead spending variance. This is because the fixed overhead cost allocated to the plant asset will be spread over a longer period of time, resulting in a lower depreciation expense and a favorable spending variance.

During the Middle of the Fiscal Year, AWR Corporation Unexpectedly