The most important contributor to the variance between actual and applied overhead costs is ________.
A) poor forecasting
B) inefficient use of overhead items
C) price changes in overhead items
D) operating at a different level of volume than the level used as a denominator in calculating the budgeted overhead rate

Question

Quizplus · Accepted Answer

Operating at a different level of volume than the level used as a denominator in calculating the budgeted overhead rate can result in significant variances between actual and applied overhead costs. This is because the budgeted overhead rate is calculated based on an assumption of how much overhead will be incurred at a certain level of activity, and if the level of activity differs from that assumption, the amount of overhead incurred will also differ. Poor forecasting, inefficient use of overhead items, and price changes in those items can also contribute to variance, but they are generally considered less significant than operating at a different volume level.

The Most Important Contributor to the Variance Between Actual and Applied