Question

****37) An *unfavorable variable overhead efficiency variance* indicates that ________.

A) the actual rate of variable overhead was more than budgeted rate
B) the price of variable overhead items was less than budgeted
C) the variable overhead cost-allocation base was not used efficiently
D) the variable overhead cost-allocation base was used efficiently

Answer 1

Unfavorable variable overhead efficiency variance signifies inefficiency in the use of the variable overhead cost-allocation base, as more hours than expected are used.

Step-by-step explanation:

An unfavorable variable overhead efficiency variance indicates that C) the variable overhead cost-allocation base was not used efficiently. This efficiency variance measures the difference between the actual hours taken to produce a good or service and the expected (or budgeted) hours, when applied to the variable overhead rate. If more hours are spent than budgeted, this signifies inefficiency, leading to the variance being unfavorable.