If the standard hours allowed for the actual output of the period is greater than the denominator level of activity (in hours), then the overhead budget variance will be unfavorable.

Question

Quizplus · Accepted Answer

If the standard hours allowed for actual output is greater than the denominator level of activity, it means that overhead costs were spread over more hours than expected. This results in a favorable overhead budget variance. On the other hand, if the denominator level of activity is greater than the standard hours allowed, it means that overhead costs were spread over fewer hours than expected, resulting in an unfavorable overhead budget variance.

If the Standard Hours Allowed for the Actual Output of the Period