An unfavorable volume-production variance is used to measure the amount of __________?
Correct answer: C. fixed setup cost
- A. variable setup cost
- B. total setup cost
- C. fixed setup cost
- D. total overhead cost
Explanation
An unfavorable production volume variance indicates that actual production was below the denominator level, causing fixed overhead to be under-absorbed. Thus, it measures the unfavorable effect relating to fixed setup or capacity cost, not variable setup cost.
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About Cost Accounting
Cost accounting measures and analyses the cost of producing goods or providing services for planning, control and pricing decisions. It covers direct and indirect costs, fixed and variable costs, job and process costing, break-even analysis, marginal costing, overhead allocation, and the difference between product cost and period cost.
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