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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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A variable overhead spending variance can occur because

  1. a. prices for individual overhead items have increased.
  2. b. prices for individual overhead items have decreased.
  3. c. more of an individual overhead item was used than expected.
  4. d. less of an individual overhead item was used than expected.
  5. e. All of these.

To determine

Identify when variable overhead spending variance occurs.

Explanation

Variance:

The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.

a.

An increase in the price of an individual overhead item will result in variable overhead spending variance. This option is correct, but other statements are correct as well. Therefore, a is not the correct option.

b.

An increase or decrease in price of an individual overhead item will simultaneously increase or decrease the overhead cost which will result in variance. This option is correct, but other statements are correct as well...

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