Fleming 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) $63,495 U
B) $45,495 F
C) $45,495 U
D) $63,495 F

Question

Fleming 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) $63,495 U 
B) $45,495 F 
C) $45,495 U 
D) $63,495 F

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $190,485/25,500 labor-hours
= $7.47 per labor-hour
Volume variance = Budgeted fixed overhead − Fixed overhead applied to work in process
= $190,485 − ($7.47 per labor-hour × 17,000 labor-hours)
= $190,485 − ($126,990)
= $63,495 U
or
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output)
= $7.47 per labor-hour × (25,500 labor-hours − 17,000 labor-hours)
= $7.47 per labor-hour × (25,500 labor-hours − 17,000 labor-hours)
= $7.47 per labor-hour × (8,500 hours)
= $63,495 U

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