Alex Corporation has a large underapplied overhead balance in the manufacturing overhead account. This could be explained by:
A)an unfavorable volume variance, assuming all other variances are zero.
B)a favorable volume variance, assuming all other variances are zero.
C)standard hours allowed for the period's output being greater than denominator hours for the period.
D)favorable total variance for overhead.

Question

Quizplus · Accepted Answer

An underapplied overhead balance indicates that the actual overhead costs were higher than the applied overhead costs. An unfavorable volume variance occurs when the actual production volume is less than the expected volume, leading to less overhead being applied than was actually incurred.

Alex Corporation Has a Large Underapplied Overhead Balance in the Manufacturing