What will the result be if variable manufacturing overhead is applied based on direct labour hours and there is an unfavourable direct labour efficiency variance?
A)The direct materials usage variance will be unfavourable.
B)The direct labour rate variance will be favourable.
C)The variable manufacturing overhead efficiency variance will be unfavourable.
D)The variable manufacturing overhead spending variance will be unfavourable.

Question

Quizplus · Accepted Answer

When applying variable manufacturing overhead based on direct labour hours, the variable manufacturing overhead efficiency variance is calculated based on the difference between the actual direct labour hours used and the standard direct labour hours allowed, multiplied by the standard variable overhead rate per hour. An unfavourable direct labour efficiency variance means that more actual hours were used than what was budgeted for the same amount of output. This would result in a higher variance as more hours were worked than what was expected, causing the variable manufacturing overhead efficiency variance to be unfavourable.

What Will the Result Be If Variable Manufacturing Overhead Is