In a standard cost system, the volume variance will be unfavourable when
A)actual hours are greater than the denominator hours.
B)the standard hours allowed for the output of the period are less than the denominator hours.
C)the standard hours allowed for the output of the period are greater than the actual hours incurred.
D)actual hours are less than the denominator hours.

Question

Quizplus · Accepted Answer

The volume variance is the difference between the denominator hours (the budgeted hours for the output achieved) and the standard hours allowed for the output of the period. This variance measures the impact of the difference between the budgeted and actual level of activity on the cost per unit. 
If the standard hours allowed for the output of the period are less than the denominator hours (i.e., the budgeted hours for the output achieved), the volume variance will be unfavorable, indicating that the actual output level was less than budgeted, resulting in the underutilization of capacity and a higher cost per unit.

In a Standard Cost System, the Volume Variance Will Be