When machine-hours are used as a cost-allocation base, the item most likely to contribute to a favorable production-volume variance is:
A)an increase in the selling price of the product
B)the purchase of a new manufacturing machine costing considerably less than expected
C)a decline in the cost of energy
D)strengthened demand for the product

Question

Quizplus · Accepted Answer

When machine-hours are used as a cost-allocation base, the production-volume variance is typically caused by the difference between the actual number of machine-hours used and the budgeted number of machine hours. If the actual number of machine-hours used is higher than the budgeted number, it will result in a favorable production-volume variance. This can be caused by increased demand for the product, which requires more production and therefore more machine-hours.

When Machine-Hours Are Used as a Cost-Allocation Base, the Item