Is the total overhead variance from the previous question favourable or unfavourable?

Unfavourable

Question

Is the total overhead variance from the previous question favourable or unfavourable?

Unfavourable

BlackTom AI · Accepted Answer

Total overhead variance equals the difference between actual overheads incurred and the overheads that were budgeted or absorbed at standard/expected activity. Relevant concepts: if actual overhead > budgeted/applied overhead the variance is unfavourable (adverse); if actual overhead < budgeted/applied the variance is favourable. Step-by-step reasoning and calculation method: 1. Formula: Total overhead variance = Actual overheads incurred − Budgeted/applied (standard) overheads. Some texts use Applied − Actual; the sign convention matters, but the interpretation is the same: positive excess of actual costs is unfavourable. 2. Determine values from the previous question (the previous solution must have given actual and budgeted/applied amounts or a computed variance). For example, if Actual overheads = £12,000 and Budgeted/applied overheads = £11,200 then: - Total overhead variance = £12,000 − £11,200 = £800. 3. Interpret the sign: Because actual > budgeted, the variance of +£800 indicates extra cost above expectation; this is unfavourable. Why this answer is correct: - An unfavourable variance means the company spent more on overheads than planned, reducing profit relative to budget. The positive difference (actual minus budget) is the clear indicator of an unfavourable outcome. - The multiple-choice alternative would be “Favourable,” which would only be correct if actual overheads were less than budgeted (actual − budget < 0). Because the previously computed variance shows actuals exceeding the standard, “Favourable” does not apply. Conclusion: Given that the actual overheads exceeded the budgeted/applied overheads in the prior calculation, the total overhead variance is Unfavourable, which matches the provided answer.

Is the total overhead variance from the previous question favourable or unfavourable? Unfavourable多重下拉选择题

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