A company using absorption costing had an unfavorable volume variance. Which of the following statements is true?
A) Budgeted fixed overhead costs were less than actual
B) Allocated fixed overhead costs were greater than were budgeted
C) Income will be higher when the volume variance is charged to cost of goods sold than if it is allocated to cost of goods sold, finished goods, and work in process
D) The unfavorable volume variance reduces reported income

Question

Quizplus · Accepted Answer

An unfavorable volume variance indicates that actual production was less than expected, leading to under-applied fixed overhead costs, which reduces reported income.

A Company Using Absorption Costing Had an Unfavorable Volume Variance