A Favorable Variance Reflects a Decrease in Operating Income

question 141

True/False

A favorable variance reflects a decrease in operating income.

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Definitions:

Labor Efficiency Variance

The difference between the actual hours worked and the standard hours allowed for the work done, multiplied by the standard labor rate.

Direct Labor-Hours

The total hours worked by employees directly involved in the manufacturing of a product.

Variable Manufacturing Overhead

Costs that vary with the level of production output and may include expenses such as indirect materials, utilities, and overtime labor.

Raw Materials

Primary substances or components that are converted through the manufacturing process into a finished product.