Question Help Each of the following statements is correct regarding overhead variances except: A. Favorable spending and efficiency variances imply that the flexible budget variance must be favorable. B. The efficiency overhead variance ignores the standard variable overhead rate. C. Actual overhead greater than applied overhead is unfavorable. D. Variable overhead rates are not a factor in the production-volume variance calculation.

B

The efficiency overhead variance ignores the standard variable overhead rate.

Explanation:

Overhead variance refers to the difference between actual overhead and applied overhead. You can only compute overhead variance after you know the actual overhead costs for the period. Overhead is applied based on a predetermined rate and a cost driver. Overhead variance arises due to the differences between actual overhead variances and the budgeted or the absorbed variances. Actual overhead variances are those that have been incurred and can be known at the end of a particular accounting period after the accounts have been prepared.

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