Marshall Company uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Marshall had a favorable efficiency variance for variable overhead costs.Which of the following scenarios is a reasonable explanation for this variance?
A) The actual number of direct labor hours was lower than the budgeted hours.
B) The actual variable overhead costs were higher than the budgeted costs.
C) The actual variable overhead costs were lower than the budgeted costs.
D) The actual number of direct labor hours was higher than the budgeted hours.

Question

Quizplus · Accepted Answer

A favorable efficiency variance for variable overhead costs means that the actual direct labor hours used were lower than the budgeted hours. This indicates that the employees were more efficient in completing their tasks and required fewer hours to complete the work.

Marshall Company Uses a Standard Cost System