Asked by
Verified
If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable (U)variable overhead efficiency variance often will be a result unless managers build excessive inventories.
Variable Overhead Efficiency Variance
The difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate.
Insufficient Demand
A situation where the quantity of a product or service desired by consumers is less than what is supplied in the market.
Excessive Inventories
A situation where a company holds more stock than what is effectively required, leading to increased storage costs and possible obsolescence.
- Comprehend the idea of favorable and unfavorable variances within the realms of revenue and cost management.
- Comprehend the critical role that activity levels play in controlling expenses and formulating variable budgets.
- Comprehend the impact of demand and activity levels on variable and fixed overhead variances.
Verified Answer
Learning Objectives
- Comprehend the idea of favorable and unfavorable variances within the realms of revenue and cost management.
- Comprehend the critical role that activity levels play in controlling expenses and formulating variable budgets.
- Comprehend the impact of demand and activity levels on variable and fixed overhead variances.
Related questions
In a Flexible Budget, When the Activity Declines, the Total ...
Actual Costs Are Determined by Plugging the Actual Level of ...
A Revenue Variance Is the Difference Between What the Total ...
Flexible Budgets Can Be Used When There Is More Than ...
A Revenue Variance Is Unfavorable If the Revenue in the ...