If a Company That Applies Variable Overhead on the Basis

question 172

Multiple Choice

If a company that applies variable overhead on the basis of direct labor hours records an unfavorable direct labor efficiency variance, the variable overhead efficiency variance will be

• A)unfavorable.
• B)favorable.
• C)zero.
• D)Undeterminable based on the given information.

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Definitions:

Relevant Activities

Activities of the investee that significantly affect the investee’s returns.

Investee's Returns

Refers to the earnings gained from the investment in another entity, including dividends and value appreciation.

Single Economic Entity

A concept where a parent company and its subsidiaries are presented as one reporting entity in consolidated financial statements, ignoring the legal boundary that separates them.

AASB 10/IFRS 10

An Australian/international financial reporting standard that establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.