Answer the following questions using the information below:
Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:

-When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the most likely result would be to report a(n):
A)favorable variable overhead spending variance
B)unfavorable variable overhead efficiency variance
C)favorable fixed overhead flexible-budget variance
D)unfavorable production-volume variance

Question

Answer the following questions using the information below:
Fearless Frank's Fertilizer Farm produces fertilizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data:
  
-When machine-hours are used as an overhead cost-allocation base and the unexpected purchase of a new machine results in fewer expenditures for machine maintenance, the most likely result would be to report a(n):
A)favorable variable overhead spending variance 
B)unfavorable variable overhead efficiency variance 
C)favorable fixed overhead flexible-budget variance 
D)unfavorable production-volume variance

Quizplus · Accepted Answer

If there are fewer expenditures for machine maintenance due to the unexpected purchase of a new machine, then the actual variable overhead cost would be less than the budgeted amount. As a result, Fearless Frank's Fertilizer Farm would report a favorable variable overhead spending variance.

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