When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance,the MOST likely result would be to report a(n):
A)unfavourable variable overhead efficiency variance.
B)unfavourable production-volume variance.
C)favourable variable overhead spending variance.
D)favourable fixed overhead flexible-budget variance.

Question

Quizplus · Accepted Answer

When there is an unexpected purchase of a new machine resulting in fewer expenditures for machine maintenance, it means that the variable overhead cost incurred is less than what was budgeted. This results in a favourable variable overhead spending variance as the actual variable overhead cost is less than the budgeted variable overhead cost.

When Machine-Hours Are Used as an Overhead Cost-Allocation Base and the Unexpected