Final answer:
An unfavorable production-volume variance indicates that a company produced fewer units than planned, resulting in a higher fixed cost per unit, and does not necessarily reflect on lost opportunities or sales strategies.
Step-by-step explanation:
An unfavorable production-volume variance indicates that there was a lower level of production than planned, which results in a higher fixed overhead cost per unit.
This does not measure the amount of extra fixed costs planned for but not used, as it concerns the allocation of fixed costs to the number of units produced.
The more units produced, the lower the fixed cost per unit, hence it is not a measure of reducing per unit fixed overhead cost to improve sales and does not take into account additional revenues from maintaining higher prices.
Considering the concept of a shutdown point, which is a situation where the firm's price falls below its average variable costs (AVC) and it faces the decision to continue producing at a loss or to shut down and minimize the loss by only incurring fixed costs.
So, an unfavorable production-volume variance would not be a good measure of a lost production opportunity because it does not factor in the potential to minimize losses by shutting down, nor revenue considerations.