Marshall Company Uses a Standard Cost System

question 208

Multiple Choice

Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?

• A) The actual number of direct labor hours was lower than the budgeted hours.
• B) The actual variable overhead costs were higher than the budgeted costs.
• C) The actual variable overhead costs were lower than the budgeted costs.
• D) The actual number of direct labor hours was higher than the budgeted hours.

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Definitions:

Fixed Costs

Costs that do not vary with the level of production or output, such as rent, salaries, and insurance.

Variable Costs

Variable costs are expenses that change in proportion to the level of production or business activity.

Average Fixed Costs

The total fixed costs of production divided by the number of units produced, representing the fixed cost per unit of output.

Total Costs

encompass all expenses incurred in the production of goods or services, including both fixed and variable costs.