Akao Products uses a standard cost system.Variable overhead costs are allocated based on direct labor hours.In the first quarter,Akao had an unfavorable 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

If the actual number of direct labor hours was higher than the budgeted hours, it would result in a higher allocation of variable overhead costs, causing an unfavorable efficiency variance. This could mean that productivity was lower than expected, leading to a higher labor hour requirement to complete the same amount of work.

Akao Products Uses a Standard Cost System