If a company that applies variable overhead on the basis of direct labor hours records an unfavorable direct labor efficiency variance,the variable overhead efficiency variance will be
A)Unfavorable.
B)Favorable.
C)Zero.
D)Undeterminable.

Question

Quizplus · Accepted Answer

If the company records an unfavorable direct labor efficiency variance, it means that they used more direct labor hours than expected to produce a certain level of output. This will also result in an increase in variable overhead costs since the variable overhead is applied based on the direct labor hours. Therefore, the variable overhead efficiency variance will also be unfavorable.

If a Company That Applies Variable Overhead on the Basis