Question

Inefficient uses of variable overhead resources will affect:

	A.	both variable overhead efficiency variance and direct labor efficiency variance.
	B.	both variable overhead spending (price) variance and direct labor efficiency variance.
	C.	the variable overhead spending (price) variance.
	D.	both variable overhead spending (price) and variable overhead efficiency variances.
	E.	the variable overhead efficiency variance.

Answer 1

Solution:

Answer is: D. both variable overhead spending (price) and variable overhead efficiency variances.

Explanation: Inefficient uses of variable overhead resources will affect both variable overhead spending (price) and variable overhead efficiency variances. Inefficient use of variable overhead resources such as indirect materials and indirect labor will increase the number of hours to be worked which will affect the variable overhead efficiency variances. Similarly, due to inefficient use of variable overhead resources there will be a rise in prices due to inaccurate estimates of items containing variable overhead and there will be inadequate control on an item of an overhead cost.