Volume variances are calculated for which of the following reasons? I. GAAP requires that actual costs be recorded in the income statement and balance sheet.
II. Estimates are used for allocation rates so that costs can be allocated when actual costs are not yet known.
III. Only the IRS requires volume variances in the calculation of income taxes.
A) I only
B) II only
C) I and II only
D) I, II, and III

Question

Quizplus · Accepted Answer

Volume variances are calculated to account for the difference between the actual costs incurred and the costs that were estimated based on the actual level of activity. This is necessary because estimates are used for allocation rates so that costs can be allocated when actual costs are not yet known.

Volume Variances Are Calculated for Which of the Following Reasons