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Budgeted overhead for Cinnabar Industries at normal capacity of 30000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May $310000 of overhead was incurred in working 31500 hours when 32000 standard hours were allowed.
-The overhead volume variance is
A) $8000 favorable.
B) $11000 favorable.
C) $5000 favorable.
D) $10000 favorable.

Question

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Budgeted overhead for Cinnabar Industries at normal capacity of 30000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May $310000 of overhead was incurred in working 31500 hours when 32000 standard hours were allowed.
-The overhead volume variance is
A) $8000 favorable.
B) $11000 favorable.
C) $5000 favorable.
D) $10000 favorable.

Quizplus · Accepted Answer

The overhead volume variance is calculated as (Standard hours allowed - Normal capacity hours) x Fixed overhead rate. Here, it is (32000 - 30000) x $4 = $8000 favorable.

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