Stopyra Incorporated makes a single product-a cooling coil used in commercial refrigerators. 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) $17,856 U
B) $2,856 F
C) $17,856 F
D) $2,856 U

Question

Stopyra Incorporated makes a single product-a cooling coil used in commercial refrigerators. 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) $17,856 U 
B) $2,856 F 
C) $17,856 F 
D) $2,856 U

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $89,280/12,000 labor-hours
= $7.44 per labor-hour
Volume variance = Budgeted fixed overhead − Fixed overhead applied to work in process
= $89,280 − ($7.44 per labor-hour × 9,600 labor-hours)
= $89,280 − ($71,424)
= $17,856 U
or
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output)
= $7.44 per labor-hour × (12,000 labor-hours − 9,600 labor-hours)
= $7.44 per labor-hour × (2,400 hours)
= $17,856 U

Stopyra Incorporated Makes a Single Product-A Cooling Coil Used in Commercial