Holding Costs Are a Linear Function of Quantity Ordered

question 58

Multiple Choice

Holding costs are a linear function of quantity ordered.This means that ______.

• A)these costs increase if the quantity ordered increases and decrease as the quantity ordered decreases
• B)these costs increase if the quantity ordered decreases and decrease as the quantity ordered increases
• C)these costs remain unchanged as the quantity ordered changes
• D)these costs have no relationship with quantity ordered

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the amount of overhead allocated to production, based on standard rates.

Variable Overhead Efficiency Variance

A metric that shows the difference between the actual variable overhead costs incurred and the standard variable overhead costs expected for the achieved level of activity.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead costs incurred and the expected costs based on efficient use of resources.

Variable Overhead Efficiency Variance

The difference between the actual variable overhead incurred and the standard cost of variable overhead allocated for the actual production level, often driven by efficiency in using the variable overhead resources.