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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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An unfavorable volume variance can occur because

  1. a. too much finished goods inventory was held.
  2. b. the company overproduced.
  3. c. the actual output was less than expected or practical capacity.
  4. d. the actual output was greater than expected or practical capacity.
  5. e. All of these.

To determine

Identify the reason due to which unfavorable volume variance occur.

Explanation

Variance:

The amount obtained when actual cost is deducted from budgeted cost is known as variance. Variance is calculated to find whether the cost is over applied or under applied.

c.

The volume variance is unfavorable when the actual output is less than the expected capacity. Therefore, option c is the correct answer.

a.

The maintenance of a large amount of inventory is not sufficient to calculate the variance because it can be calculated when actual and expected output is given...

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