Asked by Katherine Fortune on Jun 24, 2024
Verified
What can create the variable overhead efficiency variance?
A) Efficient or inefficient usage of a specific component of variable overhead (e.g. electricity)
B) Production of units for finished goods inventory versus production for sale
C) Efficient or inefficient use of the cost driver (e.g. machine hours) for variable overhead
D) A difference between the planned level of output and the actual level of output
Variable Overhead Efficiency Variance
A metric used to measure the difference between the actual variable overhead cost and the standard cost of the actual production volume.
Cost Driver
A factor that causes a change in the cost of an activity.
Machine Hours
A measure of the amount of time a machine is operated, used in calculating manufacturing costs and efficiency.
- Understand the factors causing variances in standard costing, including variable overhead efficiency and fixed overhead volume variances.
Verified Answer
QE
Queenie EsperanceJun 29, 2024
Final Answer :
C
Explanation :
The variable overhead efficiency variance is based on the difference between the actual hours of usage of the cost driver (e.g. machine hours) and the standard hours of usage for the actual level of output. Therefore, the efficient or inefficient use of the cost driver directly affects this variance. Choices A, B, and D may affect other variances, but not the variable overhead efficiency variance.
Learning Objectives
- Understand the factors causing variances in standard costing, including variable overhead efficiency and fixed overhead volume variances.