A Company Using Absorption Costing Had an Unfavorable Volume Variance

question 16

Multiple Choice

A company using absorption costing had an unfavorable volume variance. Which of the following statements is true?

• A) Budgeted fixed overhead costs were less than actual
• B) Allocated fixed overhead costs were greater than were budgeted
• C) Income will be higher when the volume variance is charged to cost of goods sold than if it is allocated to cost of goods sold, finished goods, and work in process
• D) The unfavorable volume variance reduces reported income

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Definitions:

Pyruvate

A key end-product of glycolysis that can enter the Krebs cycle or undergo fermentation in the absence of oxygen.

Lever Systems

Mechanical systems comprising a lever (rigid rod) that moves around a fixed point (fulcrum) to produce movement, utilized in describing bone and muscle actions.

Applied Force

A force that is applied to an object by a person or another object.

Fulcrum

The fixed point around which a lever pivots, enabling the lever to lift or move loads with less effort.