If a company has a budgeted production of 1,000 units and actual production of 1,200 units, what type of variance is this?

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Q: If a company has a budgeted production of 1,000 units and actual production of 1,200 units, what type of variance is this?

Solution: This is a volume variance as it reflects the difference between budgeted and actual production levels.

Steps: 5

Step 1: Understand what budgeted production means. This is the number of units the company planned to produce, which is 1,000 units.
Step 2: Understand what actual production means. This is the number of units the company actually produced, which is 1,200 units.
Step 3: Compare the budgeted production (1,000 units) with the actual production (1,200 units).
Step 4: Identify the difference between actual and budgeted production. In this case, the actual production is higher than the budgeted production.
Step 5: Recognize that this difference indicates a volume variance, as it shows a change in the quantity produced compared to what was planned.