COST ACCOUNTING
STANDARD COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Actual variable overhead rate is higher than standard variable overhead rate
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Actual variable overhead rate is lower than standard variable overhead rate
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Actual variable overhead is lower than standard variable overhead
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Actual variable overhead is higher than standard variable overhead
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Detailed explanation-1: -Variable overhead spending variance is favorable if the actual costs of indirect materials-for example, paint and consumables such as oil and grease-are lower than the standard or budgeted variable overheads. It is unfavorable if the actual costs are higher than the budgeted costs.
Detailed explanation-2: -Favorable fixed overhead expenditure variance suggests that actual fixed costs incurred during the period have been lower than budgeted cost.
Detailed explanation-3: -What is the variable overhead efficiency variance? In accounting, the variable overhead efficiency variance is the difference between actual hours worked and budgeted hours worked and the effect of that difference on revenue and profit. It originates from the difference in productive efficiency.
Detailed explanation-4: -Determination of Variable Overhead Variances There are two components to variable overhead rates: the overhead application rate and the activity level against which that rate was applied.