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Asked by Hailey Gallant on Jun 09, 2024

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Although favorable fixed factory overhead volume variances are usually good news, if inventory levels are too high, additional production could be harmful.

Fixed Factory Overhead Volume Variances

The difference between the budgeted and the actual volume of production, affecting the fixed factory overhead costs.

Inventory Levels

The quantity of goods that a company has in stock at any given time, important for meeting demand without overstocking.

Production

The method of producing products and services by merging work, materials, and technology.

  • Understand the methodology and analysis of favorable and unfavorable variances.
  • Implement variance analysis methodology for assessing operational performance.
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FE
Farouk ElabbassiJun 14, 2024
Final Answer :
True
Explanation :
Favorable fixed factory overhead volume variances indicate efficient use of production capacity, but if inventory levels are already high, producing more can lead to excess inventory, increasing storage costs and potentially leading to obsolete stock.

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