When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable variable overhead efficiency variance is:
A)excessive machine breakdowns
B)the production scheduler's impressive scheduling of machines
C)a decline in the cost of energy
D)strengthened demand for the product

Question

Quizplus · Accepted Answer

When machine-hours are used as a cost-allocation base, the variable overhead efficiency variance measures the difference between the actual and expected costs of the variable overhead incurred to produce a given number of machine-hours. If the production scheduler is able to effectively schedule the machines to minimize idle time and maximize production, this can contribute to a favorable variable overhead efficiency variance as there would be fewer machine-hours required to produce the same amount of output. Excessive machine breakdowns (A) would lead to increased downtime and greater use of variable overhead resources, resulting in an unfavorable variance. A decline in the cost of energy (C) would impact the variable overhead rate, but would not necessarily affect the variable overhead efficiency variance. Strengthened demand for the product (D) would increase production volume, which may increase the total variable overhead incurred but would not necessarily affect the efficiency of variable overhead usage.

When Machine-Hours Are Used as a Cost-Allocation Base, the Item