If actual demand is greater than anticipated, an overall favorable variance will exist for each of the three production costs.

Question

Quizplus · Accepted Answer

A favorable variance in production costs typically occurs when actual costs are lower than expected costs. If actual demand is greater than anticipated, this could lead to higher production volumes, potentially increasing variable costs and possibly leading to unfavorable variances if costs per unit rise or if inefficiencies occur. Fixed costs might spread over more units, potentially creating some favorable variances, but it's not guaranteed for all cost types.

If Actual Demand Is Greater Than Anticipated, an Overall Favorable