Question

3) When variable overhead spending variance is unfavorable, it can be safely assumed that ________.

A) actual rate per unit of cost-allocation base is higher than budgeted rate
B) actual quantity of cost-allocation base used is higher than budgeted quantity
C) actual rate per unit of cost-allocation base is lower than budgeted rate
D) actual quantity of cost-allocation base used is lower than budgeted quantity

Answer 1

When the variable overhead spending variance is unfavorable, it means that the actual rate per unit of cost-allocation base is higher than the budgeted rate.

Step-by-step explanation:

When the variable overhead spending variance is unfavorable, it can be safely assumed that the actual rate per unit of cost-allocation base is higher than the budgeted rate.

The variable overhead spending variance measures the difference between the actual amount spent on variable overhead and the budgeted amount. If the variance is unfavorable, it means that the actual spending is higher than the budgeted amount. Since the variance is caused by the rate per unit of cost-allocation base, it implies that the actual rate is higher than the budgeted rate.