Question

Which variance term refers to fuel gains and losses at Defense Fuel Support Points during routine operating conditions?

1) Direct Material Variances
2) Direct Labor Variances
3) Variable Overhead Variances
4) Fixed Overhead Variances

Answer 1

Variable Overhead Variances is the term for fuel gains and losses at Defense Fuel Support Points, reflecting the changes in variable costs like raw materials as output fluctuates.

Step-by-step explanation:

The variance term that refers to fuel gains and losses at Defense Fuel Support Points during routine operating conditions is known as Variable Overhead Variances. This term falls into the category of variances that capture the fluctuations in variable costs, which are costs associated with variable inputs like labor and raw materials. These variances occur because as output increases or decreases, variable costs also correspondingly fluctuate. In the context of fuel support points, fuel can be considered a raw material whose costs would vary with the amount handled or supplied and thus, gains or losses in fuel would be reflected as variable overhead variances.