Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

A manufacturing company has an unfavorable volume variance. Which statement is true?

Actual sales revenue exceeded budgeted sales revenue.

The company sold more units than it produced.

Actual production was less than the expected (budgeted) production level.

Actual production was greater than the expected (budgeted) production level.

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Verified step by step guidance

Understand the concept of volume variance: Volume variance occurs when there is a difference between the actual production level and the budgeted production level. It is considered unfavorable when actual production is less than the budgeted production level, as this typically leads to higher per-unit costs due to fixed costs being spread over fewer units.

Analyze the options provided: The problem asks which statement is true in the context of an unfavorable volume variance. Carefully read each option and determine whether it aligns with the definition of unfavorable volume variance.

Option 1: 'Actual sales revenue exceeded budgeted sales revenue' - This statement is unrelated to production levels and focuses on sales revenue, which does not directly impact volume variance. Eliminate this option.

Option 2: 'The company sold more units than it produced' - This statement refers to inventory levels and sales, not production levels. While it may lead to inventory depletion, it does not directly explain an unfavorable volume variance. Eliminate this option.

Option 3: 'Actual production was less than the expected (budgeted) production level' - This statement aligns with the definition of unfavorable volume variance, as lower production than budgeted results in higher per-unit costs. This is the correct answer. Option 4, 'Actual production was greater than the expected (budgeted) production level,' would result in a favorable variance, not an unfavorable one.