When machine-hours are used as a cost-allocation base, the item most likely to contribute to an unfavorable production-volume variance is:
A)a new competitor gaining market share
B)a new manufacturing machine costing considerably more than expected
C)an increase in the cost of energy
D)strengthened demand for the product

Question

Quizplus · Accepted Answer

An unfavorable production-volume variance occurs when actual production is less than expected. A new competitor gaining market share could reduce demand, leading to lower production levels.

When Machine-Hours Are Used as a Cost-Allocation Base, the Item