Assume that machine hours drive the cost for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:
A) volume variance.
B) production variance.
C) efficiency variance.
D) sum of the spending and efficiency variances.
E) spending variance.

Question

Quizplus · Accepted Answer

The difference between the actual variable overhead incurred and the applied variable overhead is the sum of the spending and efficiency variances. The spending variance shows how much the actual overhead costs differ from what was expected for the actual hours worked, and the efficiency variance shows how effectively those hours were used compared to what was expected.

Assume That Machine Hours Drive the Cost for Overhead