Felter Company uses a standard costing system based on direct labour hours.Last month,Felter Company used more direct labour hours than planned,while the production level was consistent with expectations.This is likely to result in:
A) Unfavourable fixed overhead variance and unfavourable variable overhead spending variance.
B) Unfavourable fixed overhead variance and unfavourable variable overhead efficiency variance.
C) Unfavourable variable overhead spending variance.
D) Unfavourable variable overhead efficiency variance.

Question

Quizplus · Accepted Answer

This is likely to result in an unfavourable variable overhead efficiency variance, as more direct labour hours were used than planned. The fixed overhead variance should not be affected by the increase in direct labour hours, as fixed overhead costs should remain the same regardless of production volume or direct labour hours. The variable overhead spending variance would only be unfavourable if the actual variable overhead costs were higher than the expected costs, which is not indicated in the scenario. Therefore, option D is the most appropriate answer.

Felter Company Uses a Standard Costing System Based on Direct