When Walston Corporation prepared its budget for 2017, it estimated fixed overhead of $540,000 ($45,000 per month) and variable overhead at $3.00 per unit produced.The company planned to produce 48,000 units during the year at a rate of 4,000 units each month.During April, the company produced 3,800 units and total overhead costs were $59,000.How much is the overhead volume variance for April?
A)$2,250 unfavorable
B)$2,850 unfavorable
C)$1,000 unfavorable
D)$1,600 unfavorable

Question

Quizplus · Accepted Answer

The overhead volume variance is calculated as the difference between the budgeted fixed overhead and the applied fixed overhead. The budgeted fixed overhead for April is $45,000. The applied fixed overhead is based on the standard production level of 4,000 units, which is $45,000. Since only 3,800 units were produced, the applied fixed overhead is $45,000 * (3,800/4,000) = $42,750. The overhead volume variance is $45,000 - $42,750 = $2,250 unfavorable.

When Walston Corporation Prepared Its Budget for 2017, It Estimated