Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:
A) favorable.
B) unfavorable.
C) zero.
D) either favorable or unfavorable.

Question

Quizplus · Accepted Answer

If the labor efficiency variance is favorable (meaning the actual labor hours worked were lower than the standard hours allowed), it would result in a lower allocation of variable overhead to products. This would lead to a favorable variable overhead efficiency variance since less overhead was used to produce the same number of products.

Variable Manufacturing Overhead Is Applied to Products on the Basis