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Explain Why There Is No Production-Volume Variance for Variable Manufacturing

question 20

Essay

Explain why there is no production-volume variance for variable manufacturing overhead costs.


Definitions:

Expansionary Gap

A situation where the output of an economy is greater than the full employment output, often leading to inflation.

Long-Run Equilibrium

A state in which all factors of production are used efficiently, market supply and demand are balanced, and there is no tendency for change in the economic variables.

Expansionary Gap

A situation where the actual output in an economy exceeds the potential output due to high demand, often leading to inflationary pressures.

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