Variable Manufacturing Overhead Is Applied to Products on the Basis

question 92

Multiple Choice

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is unfavorable, the variable overhead efficiency variance will be:

• A)favorable.
• B)unfavorable.
• C)either favorable or unfavorable.
• D)zero.

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Definitions:

Bad Debts Expense

An expense account reflecting the cost of accounts receivable that a company does not expect to collect due to customer defaults.

Allowance Method

An accounting technique used to account for bad debts by estimating and recording uncollectible accounts receivable.

Outstanding Receivables

The total amount of money owed to a company by its customers for goods or services delivered but not yet paid for.

Allowance for Doubtful Accounts

A reserve for accounts receivable that may not be collectable, reducing the book value of accounts receivable to a more realistic value.