Trumbauer 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) $18,482 U
B) $18,482 F
C) $31,482 U
D) $31,482 F

Question

Trumbauer 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) $18,482 U 
B) $18,482 F 
C) $31,482 U 
D) $31,482 F

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $157,410/27,000 machine-hours
= $5.83 per machine-hour
Volume variance = Budgeted fixed overhead − Fixed overhead applied to work in process
= $157,410 − ($5.83 per machine-hour × 21,600 machine-hours)
= $157,410 − ($125,928)
= $31,482 U
or
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output)
= $5.83 per machine-hour × (27,000 machine-hours − 21,600 machine-hours)
= $5.83 per machine-hour × (5,400 hours)
= $31,482 U

Trumbauer Incorporated Makes a Single Product-An Electrical Motor Used in Many