If Variable Manufacturing Overhead Is Applied on the Basis of Direct

question 145

Multiple Choice

If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then:

• A) the actual variable overhead rate exceeded the standard rate.
• B) the standard variable overhead rate exceeded the actual rate.
• C) the actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output.
• D) the standard direct labor-hours allowed for the actual output exceeded the actual hours.

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Definitions:

Inventories

Assets held for sale in the ordinary course of business, in the process of production for such sale, or in the form of materials or supplies to be consumed in the production process.

Parent Entity

A company that has control over one or more subsidiaries.

Company Tax Rate

The rate at which a company’s taxable income is taxed by the government, which varies by country and sometimes also by the type and size of the company.

Inventories

Goods owned with the intention to sell them through standard business activities, in the stage of being made for sale, or as parts or materials meant for consumption in production activities or while offering services.