What Could Cause a Sales Volume Variance for Fixed Expenses

question 204

Multiple Choice

What could cause a sales volume variance for fixed expenses?

• A)Insurance costs on the factory rise unexpectedly during the year due to a crisis in the insurance industry.
• B)The union calls for a strike of factory workers and temporary workers are hired to fill in for the striking employees.
• C)The lease on the manufacturing facility is renegotiated and the lease payments increase during the year.
• D)The number of units actually sold falls within a different relevant range than the static budget sales volume.

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Definitions:

Production Volumes

The quantity of goods a company produces within a given period, often used to measure operational efficiency.

High-low Method

An accounting technique used to estimate the variable and fixed components of a company's costs, based on the highest and lowest levels of activity.

Fixed Costs

Expenses that do not change in total regardless of the level of production or sales activity.

Variable Costs

Expenses that vary directly with changes in production or sales volumes, such as raw materials and direct labor costs.