An unfavorable variable overhead efficiency variance indicates that ________.
A) the actual rate of variable overhead was more than budgeted rate
B) the price of variable overhead items was less than budgeted
C) the variable overhead cost-allocation base was not used efficiently
D) the variable overhead cost-allocation base was used efficiently

Question

Quizplus · Accepted Answer

An unfavorable variable overhead efficiency variance indicates that the variable overhead cost-allocation base was not used efficiently, meaning that the actual usage of the allocation base was less than the budgeted or standard usage. This results in an unfavorable variance because a higher amount of variable overhead costs are being allocated to the production of goods, which can negatively impact profitability. Choices A and B relate to the variable overhead rate and price variances, respectively, and do not address efficiency. Choice D is incorrect as an unfavorable efficiency variance implies that the allocation base was not efficiently used.

An Unfavorable Variable Overhead Efficiency Variance Indicates That ________