When Machine-Hours Are Used as an Overhead Cost-Allocation Base and Annual

question 168

Multiple Choice

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.

• A) unfavorable variable overhead spending variance
• B) favorable variable overhead efficiency variance
• C) unfavorable fixed overhead flexible-budget variance
• D) favorable production-volume variance

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Definitions:

Contractual Rights

Legal rights acquired by individuals or entities under the terms of a contract, including the rights to receive goods, services, or payments.

Creditor Beneficiary

A third party that benefits from a contract, particularly one made between two other parties to pay a debt owed to the beneficiary.

Second-Party Beneficiary

An individual or entity that is not directly involved in a contract but stands to benefit from its execution, typically in contracts intended to benefit a third party.

Vesting

The process by which an individual acquires the right to a present or future payment, benefit, or asset, becoming fully guaranteed even if the individual's status changes.