Caution is appropriate before interpreting the production-volume variance as a measure of the economic cost of unused capacity.

Question

Quizplus · Accepted Answer

The production-volume variance only measures the difference between planned and actual output and does not take into account other factors such as fixed costs associated with unused capacity. Therefore, caution should be exercised before interpreting the production-volume variance as a measure of the economic cost of unused capacity.

Caution Is Appropriate Before Interpreting the Production-Volume Variance as a Measure