The Efficiency Variance Measures ________

question 133

Multiple Choice

The efficiency variance measures ________.

• A) the difference between the quantity used by the company and the quantity used by its competitors
• B) the change in quantities used over time
• C) how well the business uses its materials or human resources
• D) how quickly direct materials are processed into finished goods

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Definitions:

Overhead Efficiency

Measures how well a company or organization utilizes its overhead expenses to produce goods or provide services.

Fixed Overhead Budget

A plan that outlines the expected fixed costs of operating a business or manufacturing a product, which do not change with production volume or sales levels.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to products or job orders, based on a chosen activity base such as direct labor hours.

Variable Component

A part of a cost or expense that varies directly with the level of output or activity.