If a Variance Is Considered Material, It Should Be Allocated

question 43

True/False

If a variance is considered material, it should be allocated to work in process inventory, finished goods inventory, and cost of goods sold.

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Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard variable overhead estimated.

Variable Overhead Efficiency Variance

The difference between the actual hours taken to produce a good and the standard hours expected, multiplied by the variable overhead rate.

Favorable

A term often used in financial and operational reporting to indicate better-than-expected performance or results.

Unfavorable

A situation or condition that is disadvantageous, harmful, or detrimental, often used in financial contexts to describe variances or outcomes that negatively impact performance.