Answer:
Option 1 is correct (Special Case)
The answer depends upon the morale of the management. If the management's morale has very low then as part of motivation we must not defer the unfavorable volume variance result because it further demotivates the management as the target might not be achievable after deferring the results now. Whereas in the case of favorable results, the result must not be deferred because the management morale was low and now after the achievement has grown significantly. So their is no need to defer this favorable volume variance result.
Option 4 is correct (Ordinarily)
The option 4 is correct because ordinarily, the favorable volume variance is deferred to absorb it by the end of the fiscal period. This helps in continuous performance appraisal of the management and awarding them to motivate to further improve their results. Furthermore, if the result is unfavorable then the senior management tries to acknowledge the situation and recommend the corrective actions to take to improve the results and convert this unfavorable volume variance into favorable variance in the next quarter.
