A Favorable Variance Occurs on a Performance Report When ________

question 46

Multiple Choice

A favorable variance occurs on a performance report when ________.

• A) the actual cost is greater than the budgeted cost
• B) the actual revenue is less than the budgeted revenue
• C) the actual profit is less than the budgeted profit
• D) the actual profit is greater than the budgeted profit

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Definitions:

Variable Manufacturing Overhead

Costs associated with manufacturing that vary directly with the levels of production output, such as raw materials and labor.

Overhead Applied

The allocated manufacturing overhead costs to individual products or jobs based on a predetermined rate.

Predetermined Overhead Rate

A rate calculated before the year begins, used to allocate estimated overhead costs to products based on a chosen activity base.

Machine-Hours

The total number of hours that a machine is in operation, used as a basis for allocating manufacturing overhead costs related to machinery.