During the middle of the fiscal year, Fui Ltd unexpectedly revised its estimate of a plant asset's life from 6 years to 8 years. That revision is most likely to lead to:
A) Variable overhead spending variance
B) Fixed overhead spending variance
C) Fixed overhead production volume variance
D) Variable overhead efficiency variance

Question

Quizplus · Accepted Answer

Revising the estimate of a plant asset's life from 6 years to 8 years would spread the depreciation expense over a longer period, thus reducing the annual depreciation expense. This would impact the fixed overhead costs, as depreciation is a component of fixed overhead. It would not directly affect variable overheads or efficiency variances, as these are related to variable costs and operational efficiency, respectively. Therefore, it would most likely lead to a fixed overhead spending variance.

During the Middle of the Fiscal Year, Fui Ltd Unexpectedly