Question

Assume that direct labor-hours are used as the overhead allocation base. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance ________.

(A) will be favorable.
(B) will be unfavorable.
(C) cannot be determined without additional information.
(D) convert materials into the finished product.
(E) will be equal to zero.

Answer 1

(B) will be unfavorable.

Step-by-step explanation:

General expenses are those that do not vary, regardless of production. This includes the salary of the employees, rental of the premises, security, cleaning and conservation of the work environment. Variable expenses include issues such as overtime pay, purchase of raw material, electricity and bonus payment on salary.

General expenses depend on the size of the company. What is the ideal value for this concept? According to market statistics, for small industries the ideal is between 15% and 20%. For those of large size, the ideal is that it does not exceed 15%.

In the case of small businesses, the ideal value ranges between 10% and 20%, while for large businesses it should not exceed 10%. The reason is that as the company gets bigger, the volume of the billing must also be higher.