Chojnowski 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) $52,195 U
B) $65,195 U
C) $65,195 F
D) $52,195 F

Question

Chojnowski 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) $52,195 U 
B) $65,195 U 
C) $65,195 F 
D) $52,195 F

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $325,975/42,500 labor-hours
= $7.67 per labor-hour
Volume variance = Budgeted fixed overhead − Fixed overhead applied to work in process
= $325,975 − ($7.67 per labor-hour × 34,000 labor-hours)
= $325,975 − ($260,780)
= $65,195 U
or
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours − Standard hours allowed for the actual output)
= $7.67 per labor-hour × (42,500 labor-hours − 34,000 labor-hours)
= $7.67 per labor-hour × (8,500 hours)
= $65,195 U

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