Question

An unfavorable volume variance means

A) Less production than estimated
B) Expenses are under control
C) Expenses are excessive
D) None of the above

Answer 1

An unfavorable volume variance signals that actual production was less than predicted, leading to potentially higher per-unit costs and indicating that expenses may not be effectively controlled.

Step-by-step explanation:

An unfavorable volume variance refers to a situation in a business where the actual production volume is less than the estimated or planned production volume. This can indicate that the company produced fewer goods or services than anticipated, which could lead to higher unit costs and potential lost sales if there is unmet demand.

It is typically a sign that expenses are not under control because fixed costs are spread over a smaller number of units, making each unit more expensive. Expenses could be deemed excessive relative to the volume of production.