Multiple Choice QuestionThe controllable variance is the difference between the actual total overhead and:Multiple choice question.applied overhead based on a flexible budgetbudgeted overhead based on a flexible budgetbudgeted overhead based on the master budgetapplied overhead based on the master budget
Question
Multiple Choice QuestionThe controllable variance is the difference between the actual total overhead and:Multiple choice question.applied overhead based on a flexible budgetbudgeted overhead based on a flexible budgetbudgeted overhead based on the master budgetapplied overhead based on the master budget
Solution
The controllable variance is the difference between the actual total overhead and:
a) applied overhead based on a flexible budget b) budgeted overhead based on a flexible budget c) budgeted overhead based on the master budget d) applied overhead based on the master budget
The correct answer is b) budgeted overhead based on a flexible budget.
Here's why:
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The controllable variance is a measure of how much the actual total overhead deviates from what was budgeted.
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A flexible budget adjusts to changes in activity levels, making it a more accurate reflection of the overhead costs that should have been incurred given the actual level of activity during the period.
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Therefore, the difference between the actual total overhead and the budgeted overhead based on a flexible budget gives the controllable variance.
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The other options (a, c, and d) do not accurately reflect the definition of controllable variance.
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