When production deviates from the denominator level, a production-volume variance always exists under absorption costing.

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Quizplus · Accepted Answer

This is because absorption costing allocates fixed manufacturing overhead to units of production based on the denominator level (usually machine hours or labor hours). Therefore, if actual production deviates from the denominator level, the fixed overhead allocated to each unit of production will also vary and result in a production-volume variance.

When Production Deviates from the Denominator Level, a Production-Volume Variance