Which of the following statements regarding variances is true?
A) Variances need to be calculated when budgeted costs are used to allocate indirect costs.
B) Variances arise when an entity overestimates the expenditure level of indirect costs assigned to the cost pool or the expected usage of the cost driver.
C) Variances arise when an entity underestimates the expenditure level of indirect costs assigned to the cost pool or the expected usage of the cost driver.
D) All of the statements are true.

Question

Quizplus · Accepted Answer

Variances can occur in both scenarios of overestimation and underestimation of indirect costs or the expected usage of the cost driver. Additionally, when budgeted costs are used to allocate indirect costs, variances need to be calculated to understand the differences between the budgeted and actual figures, making all the statements true.

Which of the Following Statements Regarding Variances Is True