Which of the following statements is NOT true regarding variances?

Multiple Choice

• A price variance identifies that we spend $4 per pound of materials rather than the $3 per pound we expected.

• A variable overhead efficiency variance where variable overhead is applied on the basis of direct labor hours measures how much more overhead was applied than should have because our workers took longer than they should have to produce 100 units.

• An activity variance measures the additional cost required for direct labor to produce 120 units instead of the budgeted 100 units.

• We expected to produce 150 units but only produced 100. The spending variance identifies why we spent more on raw materials than we should have to produce the budgeted 150 units.