When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is ________.Group of answer choicesa decline in the cost of energythe production manager scheduled jobs efficientlyabnormally high demand for a productabnormal high rate of machine breakdownsNone of the given choices is correct
Question
When machine-hours are used as an overhead cost-allocation base, the most likely cause of a favorable variable overhead spending variance is ________.Group of answer choicesa decline in the cost of energythe production manager scheduled jobs efficientlyabnormally high demand for a productabnormal high rate of machine breakdownsNone of the given choices is correct
Solution
The most likely cause of a favorable variable overhead spending variance when machine-hours are used as an overhead cost-allocation base is a decline in the cost of energy.
Here's why:
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Variable overhead costs are those costs that vary with the level of production. These could include costs like energy, raw materials, etc.
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A favorable variance means that the actual costs were less than the budgeted or standard costs.
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If machine-hours are used as the cost-allocation base, it means that the overhead costs are being spread out based on the number of hours the machines are running.
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Therefore, if the cost of energy (which is a significant part of the overhead costs when machines are running) declines, the actual overhead costs would be less than what was budgeted or expected, leading to a favorable variance.
So, the correct answer is "a decline in the cost of energy".
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