If a Company That Applies Variable Overhead on the Basis

question 57

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.

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Definitions:

Present Values

The today's worth of a future cash amount or cash flow series, determined by a given rate of return.

Discounting

The process of determining the present value of future cash flows by applying a discount rate, reflecting the time value of money.

Compounding

The process in which the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes.

Effective Annual Rates

The interest rate on a loan or financial product restated from the nominal rate as an annual rate that accounts for compounding over a given period.