Which Variance Is Commonly Associated with Measuring the Cost of Under-

question 88

Multiple Choice

Which variance is commonly associated with measuring the cost of under- or over-utilization of plant capacity?

• A) The variable-overhead spending variance.
• B) The variable-overhead efficiency variance.
• C) The fixed-overhead budget variance.
• D) The fixed-overhead volume variance.
• E) The total fixed-overhead variance.

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Definitions:

Average Total Cost

This refers to the total cost of production divided by the number of units produced, inclusive of fixed and variable costs.

Marginal Cost

The cost incurred by producing one additional unit of a good or service.

Opportunity Cost

Opportunity cost represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Marginal Product

Describes the additional output that is produced by using one more unit of a factor of production, holding all other factors constant.