When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase,the MOST likely result would be to report a(n):
A)favourable variable overhead efficiency variance.
B)unfavourable fixed overhead flexible-budget variance.
C)unfavourable variable overhead spending variance.
D)favourable production-volume variance.

Question

Quizplus · Accepted Answer

When leasing costs for equipment unexpectedly increase, it affects the fixed overhead cost, which is allocated based on machine-hours. A higher leasing cost means a higher fixed overhead cost, resulting in an unfavorable fixed overhead flexible-budget variance. The other options are not directly affected by changes in leasing costs.

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