The difference between the actual allocation base (actual quantity) and the amount of the allocation base that should have been used (standard quantity) times the standard cost is called the

A. variable overhead cost variance

B. variable overhead efficiency variance

C. fixed overhead cost variance

D. fixed overhead volume variance

Question

Business

Bernard Davies

28 September, 00:05

The difference between the actual allocation base (actual quantity) and the amount of the allocation base that should have been used (standard quantity) times the standard cost is called the

A. variable overhead cost variance

B. variable overhead efficiency variance

C. fixed overhead cost variance

D. fixed overhead volume variance

+1

Answers (1)

Know the Answer?

Martha Wolfe · Answer 1

B. variable overhead efficiency variance

Explanation:

Answer option A, C, and D are incorrect. In variable overhead cost variance, we determine the difference between the actual and budgeted cost. In fixed overhead cost variance, we do not use allocation base cost. Again, in fixed overhead volume variance, we cannot use allocation base cost.

'B' is correct because the difference between the actual allocation base quantity and budgeted allocation base quantity multiplying with the standard rate states the variable overhead efficiency variance. The activity level is required to determine efficiency variance.