Harris Corporation uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs). The company has provided the following data: The volume variance would be:
A) $2,500 F
B) $1,800 F
C) $1,800 U
D) $1,500 F

Question

Harris Corporation uses a standard cost system in which it applies manufacturing overhead to units of product on the basis of standard direct labor-hours (DLHs). The company has provided the following data:  The volume variance would be:
A) $2,500 F 
B) $1,800 F 
C) $1,800 U 
D) $1,500 F

Quizplus · Accepted Answer

Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output) = $3 per DLH × (5,000 DLHs − 5,500 DLHs) = $3 per DLH × (−500 DLHs) = $1,500 F

Harris Corporation Uses a Standard Cost System in Which It