If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours),then the overhead budget variance will be unfavourable.

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Quizplus · Accepted Answer

The overhead budget variance is determined by comparing the actual overhead costs incurred to the budgeted overhead costs based on the standard hours allowed for the actual output. If the standard hours allowed for the actual output are greater than the denominator level of activity, it indicates higher production levels than anticipated, but it does not directly result in an unfavorable budget variance. The variance's favorability depends on the actual costs incurred compared to the budgeted costs for those hours, not on the comparison between standard hours allowed and the denominator level of activity.

If the Standard Hours Allowed for the Actual Output of the Period