A favourable variable manufacturing overhead efficiency variance may be interpreted as meaning which of the following if machine hours are the cost allocation base?
A)Employees used too much electricity during production.
B)Improved quality of materials resulting in less downtime to clean the machines of debris.
C)Excess supplies were used.
D)Too much of the cost driver was used.
E)The cost driver is inappropriate.

Question

Quizplus · Accepted Answer

If the manufacturing overhead efficiency variance is favourable and machine hours is the cost allocation base, then it means that less machine hours were used than expected. This could be due to improved efficiency in using the machines, such as less downtime to clean them of debris resulting from improved quality materials. A, C, D, and E are all incorrect choices because they suggest the use of more resources than expected, which would result in an unfavourable efficiency variance.

A Favourable Variable Manufacturing Overhead Efficiency Variance May Be Interpreted