ECONOMICS

Detailed explanation-1: -12-1 Effective planning of variable overhead costs involves: 1. Planning to undertake only those variable overhead activities that add value for customers using the product or service, and 2. Planning to use the drivers of costs in those activities in the most efficient way.

Detailed explanation-2: -Variable overhead costs are costs that change as the volume of production changes or the number of services provided changes. Variable overhead costs decrease as production output decreases and increase when production output increases. If there is no production output, then there would be no variable overhead costs.

Detailed explanation-3: -The correct answer is option A. actual hours x (actual rate-standard rate).

Detailed explanation-4: -How does the planning of fixed overhead costs differ from the planning of variable overhead costs? At the start of an accounting period, a large percentage of fixed overhead costs are locked-in, whereas, ongoing operating decisions determine the VOH costs.