Final answer:
Unfavorable variable cost volume variances occur when actual production volume is lower than budgeted volume, resulting in higher costs per unit. This suggests inefficiencies or higher costs for lower production volumes.
Step-by-step explanation:
Unfavorable variable cost volume variances are expected when the actual volume of production differs from the budgeted volume. This happens when the actual quantity of output is less than the budgeted quantity, resulting in higher variable costs per unit. For example, if a company budgeted to produce 1,000 units but actually produced only 800 units, the variable cost volume variance would be unfavorable.
Unfavorable variable cost volume variances should be interpreted as the difference between the budgeted and actual costs due to changes in production volume. It indicates that the company is not achieving the economies of scale that were anticipated in the budget. It may suggest inefficiencies in the production process or higher variable costs for lower production volumes.
The primary topic of this question is variable cost volume variances and their interpretation.