Canister Industries uses labor hours to apply variable overhead to production. If the company's workers were...
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Canister Industries uses labor hours to apply variable overhead to production. If the company's workers were very inefficient during the period, which of the following statements would be true about the variable-overhead efficiency variance?
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The variance would be the same amount as the labor efficiency variance.
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The nature of the variance (favorable or unfavorable) would be unknown based on the facts presented.
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None of the answers is correct.
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The variance would be favorable.
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The variance would be unfavorable.
Homework Answers
Answer
- The correct answer is Option #5: The Variance would be Unfavourable.
- Yes, the variable Overhead efficiency variance would be unfavourable if workers were inefficient.
- This is because, if they were inefficient, actual hours would
have been more than standard hours, and hence variance would be
Unfavourable.
VOEV = (Difference between actual hours & standard hours) x Variable overhead standard rate.
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