Cavalaris Products Uses a Standard Cost System

question 221

Multiple Choice

Cavalaris Products uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost 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:

Inferior Good

A type of good for which demand decreases as the income of consumers increases, inversely related to income elasticity.

Demand

The amount of a product or service that consumers are prepared and capable of buying at different price levels over a specific time frame.

Related Goods

Related goods are goods that can either be substitutes or complements to each other, affecting each other's demand and consumption patterns.

Complements

Goods or services that are used together, where demand for one increases demand for the other.