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if company D operates a variable cost system and incurs a debit overhead variance of $2800...

if company D operates a variable cost system and incurs a debit overhead variance of $2800 for the year, what conclusion(s) can you draw?   

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Answer #1

Debit balance of overhead variance represents the expenses. This means that the overhead vaiances were unfavorable which implies that actual overhead incurred were more than the budgeted overheads. This may happen due to poor efficiency, increased cost etc.

Hence, if the company D reports the debit balance of overhead variances of $2,800 it means that the company was not able to meet its target and end up being incurring $2,800 more than the amount that should have been incurred to do the same job.

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