The correct answer is: A. Standard rate (Actual output – budgeted output)
Volume variance is the difference between the actual output and the budgeted output, multiplied by the standard rate. It is a measure of how well a company has managed its production levels.
A positive volume variance indicates that the company has produced more than it budgeted for, while a negative volume variance indicates that the company has produced less than it budgeted for.
Volume variance can be caused by a number of factors, including changes in demand, changes in production capacity, and changes in the standard rate.
To calculate volume variance, you need to know the following:
- Actual output: The number of units that were actually produced.
- Budgeted output: The number of units that were budgeted to be produced.
- Standard rate: The rate that is used to price the products that are produced.
Once you have this information, you can calculate volume variance as follows:
Volume variance = Standard rate (Actual output – Budgeted output)
For example, let’s say that a company has a standard rate of $10 per unit and a budgeted output of 100 units. If the company actually produces 110 units, then the volume variance would be calculated as follows:
Volume variance = $10 (110 units – 100 units) = $100
In this case, the company has a positive volume variance of $100, which means that it has produced more units than it budgeted for.
The other options are incorrect because they do not take into account the budgeted output.