(Appendix 10A) Rainbolt Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

-The fixed overhead volume variance is:
A) $400 F
B) $19,600 F
C) $400 U
D) $19,600 U

Question

(Appendix 10A) Rainbolt Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
 
-The fixed overhead volume variance is:
A) $400 F 
B) $19,600 F 
C) $400 U 
D) $19,600 U

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $343,000/70,000 machine-hours
= $4.90 per machine-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $343,000 - ($4.90 per machine-hour × 74,000 machine-hours)
= $343,000 - ($362,600)
= $19,600 F
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $4.90 per machine-hour x (70,000 machine-hours - 74,000 machine-hours)
= $4.90 per machine-hour x (70,000 machine-hours - 74,000 machine-hours)
= $4.90 per machine-hour x (-4,000 hours)
= $19,600 F

(Appendix 10A) Rainbolt Incorporated Makes a Single Product--An Electrical Motor