The Victor Corporation has been incurring favorable overhead volume variances in each of the last several months.These persistent favorable variances indicate:
A)Victor's management is unusually efficient.
B)The overhead application rate should be revised upward.
C)Monthly output is consistently under budget.
D)Monthly output is consistently over that budgeted.

Question

Quizplus · Accepted Answer

Persistent favorable overhead volume variances indicate that the actual output is consistently higher than the budgeted output, resulting in lower overhead costs per unit. This could be due to increased efficiency, but it could also indicate overestimation of the budgeted output or other factors that are causing actual output to exceed the budget. Therefore, the best choice is D, which assumes that monthly output is consistently over that budgeted.

The Victor Corporation Has Been Incurring Favorable Overhead Volume Variances