Discount Sales Company Uses Standard Costing to Manage Their Direct

Multiple Choice

Discount Sales Company uses standard costing to manage their direct costs and overhead costs. Overhead costs are allocated based on direct labor hours. In the first quarter, Discount Sales had a favorable cost variance for their variable overhead costs. Which of the following scenarios would be a reasonable explanation for that variance?

A) The actual number of direct labor hours was lower than the budgeted hours.
B) The actual variable overhead costs were higher than the budgeted costs.
C) The actual variable overhead costs were lower than the budgeted costs.
D) The actual number of direct labor hours was higher than the budgeted hours.