Hoag Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for the most recent month appear below: The company based its original budget on 2,600 machine-hours. The company actually worked 2,280 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,080 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?
A) $4,352 Favorable
B) $4,352 Unfavorable
C) $7,072 Unfavorable
D) $7,072 Favorable

Question

Hoag Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual fixed manufacturing overhead costs for the most recent month appear below:  The company based its original budget on 2,600 machine-hours. The company actually worked 2,280 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,080 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?
A) $4,352 Favorable 
B) $4,352 Unfavorable 
C) $7,072 Unfavorable 
D) $7,072 Favorable

Quizplus · Accepted Answer

Volume variance = Budgeted fixed overhead cost − Fixed overhead applied to work in process
Fixed component of predetermined overhead rate = Estimated total fixed manufacturing overhead cost ÷ Estimated total amount of the allocation base = $35,360 ÷ 2,600 machine-hours = $13.60 per machine-hour
= $35,360 − (2,080 machine-hours × $13.60 per machine-hour)
= $35,360 − $28,288
= $7,072 U

Hoag Corporation Applies Manufacturing Overhead to Products on the Basis