The Variable Overhead Spending Variance Is Most Effective in Measuring

question 57

Multiple Choice

The variable overhead spending variance is most effective in measuring

• A)how well overhead spending matches the targets set in the original budget at the beginning of the year.
• B)the efficiency with which the activity base was utilised in production.
• C)excessive use of overhead resources.
• D)the utilisation of plant facilities.

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Definitions:

Variable Costing

A costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product cost.

Net Operating Income

A company's revenue minus its direct costs and operating expenses, indicating the profitability from regular operations before interest and taxes.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the price of a product.

Net Operating Income

The profit generated from a business's normal core operations, excluding deductions of interest and taxes.