Dapice Incorporated makes a single product-a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below: The fixed overhead volume variance is:
A) $5,121 U
B) $5,121 F
C) $21,121 F
D) $21,121 U

Question

Dapice Incorporated makes a single product-a critical part used in commercial airline seats. The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period. Data concerning the most recent year appear below:  The fixed overhead volume variance is:
A) $5,121 U 
B) $5,121 F 
C) $21,121 F 
D) $21,121 U

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $76,815/13,500 labor-hours
= $5.69 per labor-hour
Volume variance = Budgeted fixed overhead − Fixed overhead applied to work in process
= $76,815 − ($5.69 per labor-hour × 14,400 labor-hours)
= $76,815 − ($81,936)
= $5,121 F
or
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output)
= $5.69 per labor-hour × (13,500 labor-hours − 14,400 labor-hours)
= $5.69 per labor-hour × (13,500 labor-hours − 14,400 labor-hours)
= $5.69 per labor-hour × (−900 hours)
= $5,121 F

Dapice Incorporated Makes a Single Product-A Critical Part Used in Commercial