Final answer:
A favorable sales volume variance in variable costs indicates that more actual units were sold than expected, which points to an increase in demand and potential revenue.
Step-by-step explanation:
A favorable sales volume variance in variable costs suggests an increase in number of actual units sold when compared to the expected number of units sold. This means that the company has sold more units than anticipated, resulting in higher sales revenue. The variable costs, such as labor and raw materials, may have increased proportionally with the increase in sales volume. Variable costs, such as labor and raw materials, increase or decrease with output, meaning more units sold result in higher variable costs. However, if the increase in sales volume is more than anticipated, this is considered favorable because it indicates higher demand and potentially more revenue than expected. It is important to note that this does not affect fixed costs, nor does it imply an increase in variable cost per unit.