Question

1) When machine-hours are used as an overhead cost-allocation base and *annual leasing costs for equipment unexpectedly increase*, the most likely result would be to report a(n) ________.

A) unfavorable variable overhead spending variance
B) favorable variable overhead efficiency variance
C) unfavorable fixed overhead flexible-budget variance
D) favorable production-volume variance

Answer 1

The most likely result of an unexpectedly increase in annual leasing costs for equipment when machine-hours are used as an overhead cost-allocation base is an (C)unfavorable fixed overhead flexible-budget variance.

Step-by-step explanation:

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report an (C) unfavorable fixed overhead flexible-budget variance.

In this scenario, the increase in equipment leasing costs would lead to higher fixed overhead costs, which would result in a higher total overhead cost and a larger unfavorable variance.

This means that the actual fixed overhead costs incurred would be higher than the budgeted fixed overhead costs, leading to an unfavorable variance.

This variance indicates that the company's actual fixed overhead costs were higher than expected due to the unexpected increase in leasing costs.