Question

What happens to volume variance? 1.If denominator activity = standard hrs allowed for actual input 2. Den > SH 3. Den < SH

Answer 1

Volume variance in accounting depends on the relationship between the actual and standard hours allowed for a particular input.

Step-by-step explanation:

In accounting, volume variance refers to the difference between the actual number of units used and the standard number of units allowed for a particular input.

1. If the denominator activity (such as machine hours or labor hours) is equal to the standard hours allowed for the actual input, the volume variance would be zero. This means that the actual usage matches the expected usage, resulting in no variance.
2. If the denominator activity is greater than the standard hours allowed for the actual input, the volume variance would be positive. This indicates that more units were used than expected, leading to a favorable variance.
3. If the denominator activity is less than the standard hours allowed for the actual input, the volume variance would be negative. This signifies that fewer units were used than expected, resulting in an unfavorable variance.