The production-volume variance should generally not be calculated and reported for control purposes because, unless interpreted properly, it can:
A) Distract top management by focusing on operational efficiencies/inefficiencies.
B) Give information that only top management should have.
C) Distort other variable-cost variances.
D) Encourage overproduction by managers to achieve a favorable volume variance.
E) Encourage underproduction by managers to avoid an unfavorable variance.

Question

Quizplus · Accepted Answer

The production-volume variance can encourage overproduction by managers to achieve a favorable variance, which goes against the principles of lean manufacturing and cost efficiency. Therefore, it is not a reliable measure for control purposes.

The Production-Volume Variance Should Generally Not Be Calculated and Reported