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

• A. The company exceeded its planned operating level.
• B. Revenue increased.
• C. The company did not reach its predicted operating level.
• D. All overhead costs were controlled.

Answer: (C)

Unfavorable volume variance tells you that actual production fell short of the budgeted level. Volume variance = standard overhead rate times (actual volume minus budgeted volume); if actual is less than budgeted, the result is unfavorable, meaning you didn’t reach the predicted operating level. That’s why the statement about not reaching the predicted operating level is true. The other points don’t fit: exceeding the planned level would produce a favorable variance, revenue changes aren’t determined by volume variance alone, and overhead cost control isn’t implied by the volume variance by itself.