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:

Direct Labor-Hours

The sum of hours contributed by workers directly participating in the creation of a product or the execution of a service.

Variable Manufacturing Overhead

Costs in manufacturing that vary directly with the level of production output, such as utilities and raw materials.

Fixed Manufacturing Overhead

Costs associated with manufacturing that remain constant regardless of the level of production, such as rent and salaries of managerial staff.

Machine-Hours

A measurement unit used in accounting and manufacturing to allocate costs to products based on the number of hours machines are operated during the production process.