Question

Assume that machine hours is the cost driver for overhead. The difference between the actual variable overhead incurred and the applied variable overhead is the:

A. volume variance.

B. net overhead variance.

C. efficiency variance.

D. sum of the spending and efficiency variances.

E. spending variance

Answer 1

The difference between the actual variable overhead incurred and the applied variable overhead is the efficiency variance.

Step-by-step explanation:

The difference between the actual variable overhead incurred and the applied variable overhead is the

efficiency variance

.

The efficiency variance measures the cost impact of using more or less machine hours than expected. If the actual machine hours used exceed the expected machine hours, resulting in higher variable overhead costs, it would be considered an unfavorable efficiency variance. Conversely, if the actual machine hours used are lower than expected, resulting in lower variable overhead costs, it would be considered a favorable efficiency variance.