In a standard cost system,when production is greater than the estimated unit or denominator level of activity,there will be a(n)
A)unfavorable capacity variance.
B)favorable material and labor usage variance.
C)favorable volume variance.
D)unfavorable manufacturing overhead variance.

Question

Quizplus · Accepted Answer

In a standard cost system, the volume variance is unfavorable when production is less than estimated level of activity and favorable when production is greater than estimated level of activity. The capacity variance measures the difference between actual activity level and the estimated level, so it is not affected by production quantity alone. The material and labor usage variances depend on the actual usage of materials and labor compared to the standard, and are not impacted by production quantity alone. The manufacturing overhead variance is influenced by several factors including production volume, but cannot be determined without knowing the specific variance being analyzed.

In a Standard Cost System,when Production Is Greater Than the Estimated