Cavalaris Products uses a standard cost system.Overhead costs are allocated based on direct labor hours.In the first quarter,Cavalaris had an unfavorable cost 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 variable overhead costs were higher than the budgeted costs, this would result in an unfavorable cost variance. A higher actual variable overhead cost means that the company spent more on overhead expenses than it had budgeted for, which would lead to a higher total cost than expected. The other choices would result in a favorable cost variance.

Cavalaris Products Uses a Standard Cost System