Suppose a company's variable manufacturing overhead is applied on the basis of direct labour hours,and the company has an unfavourable direct labour efficiency variance.Which of the following is most likely to result?
A)The direct materials usage variance will be unfavourable.
B)The direct labour rate variance will be favourable.
C)The variable manufacturing overhead efficiency variance will be unfavourable.
D)The variable manufacturing overhead spending variance will be unfavourable.

Question

Quizplus · Accepted Answer

If the direct labour efficiency variance is unfavourable, it means that more direct labour hours were used than expected to produce the actual output. As variable manufacturing overhead is applied on the basis of direct labour hours, more variable manufacturing overhead costs will be incurred due to the higher labour hours. This will result in an unfavourable variable manufacturing overhead efficiency variance. The direct materials usage variance and the direct labour rate variance are not related to the variable manufacturing overhead efficiency variance. The variable manufacturing overhead spending variance is related to the actual variable manufacturing overhead costs incurred and not to the direct labour efficiency variance.

Suppose a Company's Variable Manufacturing Overhead Is Applied on the Basis