Which of the following statements about the mixed overhead volume variance is NOT true?

The assessment of the mixed overhead volume variance involves understanding how it interacts with the different components of overhead costs—fixed and variable. The correct answer focuses on the nature of the variance when actual production levels deviate from expected levels.

When actual production volume exceeds the expected volume, this generally leads to the allocation of fixed overhead costs across a larger number of units, resulting in a more favorable outcome in terms of overhead cost per unit. Thus, if the volume is greater than anticipated, it would generally not produce an unfavorable variance; rather, it usually results in an over-absorption of fixed overhead, which is favorable. This concept indicates that fixed overhead, being a fixed cost, doesn't change with production levels and consequently, allocating the same total fixed overhead over a larger number of units decreases the per unit cost, enhancing profitability.

Understanding that properly forecasts volume leads to better overhead allocation practices clarifies why the statement that a greater volume results in an unfavorable variance is misleading. In summary, volume variances are inherently tied to the activity levels and how well they were anticipated, affecting overall overhead allocation without inherently indicating unfavorable conditions.