Question

When machineminushours are used as an overhead costminusallocation 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. favorable productionminusvolume variance D. unfavorable fixed overhead flexibleminusbudget variance

Answer 1

D. unfavorable fixed overhead flexible minus budget variance

Explanation:

As the cost of the equipment is increasing the fixed efficiency and idle capacity variance would be unfavorable resulting in an unfavorable fixed overhead flexible minus budget variance.

The expenses of the machinery are the fixed indirect costs which result in fixed overhead variances. Since it is related to the working of the machinery it would result in efficiency and idle capacity variances that in turn would give unfavorable fixed overhead of the flexible minus budget variance.