Froelech Company has developed capacity standards.Information about a non-value-added activity is as follows: $\begin{array}{llr}
\text {Standard cost of the activity capacity acquired } &\$50,000\
\text { Standard cost of the activity capacity used } &0\
\text { Standard cost of the actual activity used} &40,000
\end{array}$
What is the volume variance?
A)$10,000 unfavourable
B)$10,000 favourable
C)$50,000 unfavourable
D)$50,000 favourable

Question

Froelech Company has developed capacity standards.Information about a non-value-added activity is as follows: $\begin{array}{llr}
  \text {Standard cost of the activity capacity acquired  } &\$50,000\
 \text { Standard cost of the activity capacity used  } &0\
 \text {  Standard cost of the actual activity used} &40,000
\end{array}$
 What is the volume variance?
A)$10,000 unfavourable
B)$10,000 favourable
C)$50,000 unfavourable
D)$50,000 favourable

Quizplus · Accepted Answer

The volume variance measures the impact on costs of changes in the level of activity compared to the expected level of activity. Since the given information states that the activity is non-value-added, any increase in the level of activity would lead to an unfavorable volume variance. The given information does not provide the expected level of activity or the actual level of activity, but we can assume that there has been an increase in activity since there is a volume variance. Therefore, the answer is either option A or C, and since option C is a larger amount, it is more likely to be the correct answer.

Froelech Company Has Developed Capacity Standards What Is the Volume Variance? A)$10,000 Unfavourable B)$10,000 Favourable C)$50,000

Froelech Company Has Developed Capacity Standards What Is the Volume Variance?
A)$10,000 Unfavourable
B)$10,000 Favourable
C)$50,000