Haley Fans manufactures and distributes circulators.The standard and actual costs for the manufacture of circulators follows: $\begin{array}{|l|l|}
\hline{\text { Standard Costs }} &{\text { Actual Costs }} \
\hline \text { Variable cost, } \$ 24 \text { per unit } & \text { Total variable cost, } \$ 12,300 \
\hline \text { Fixed cost, } \$ 40 \text { per unit } & \text { Total fixed cost, } \$ 19,250 \
\hline
\end{array}$ Budgeted factory overhead was $32,000.Overhead applied is based on the number of circulator units produced.The company estimated that 500 circulators would be produced, however only 480 were produced.How much is Haley's overhead volume variance for 2017?
A)$800 unfavorable
B)$830 favorable
C)$450 favorable
D)$50 unfavorable

Question

Quizplus · Accepted Answer

The overhead volume variance is calculated as the difference between the budgeted overhead and the overhead applied based on the actual production level. The budgeted overhead is $32,000. The overhead applied is based on the standard cost per unit, which includes both variable and fixed costs. Since the fixed cost per unit is $40 and 480 units were produced, the applied overhead for fixed costs is 480 units * $40/unit = $19,200. The volume variance is the difference between the budgeted overhead ($32,000) and the applied overhead for fixed costs ($19,200), which is $32,000 - $19,200 = $12,800 unfavorable. However, this calculation does not align with the provided options, indicating a misunderstanding in the approach.The correct approach for calculating the overhead volume variance is to compare the budgeted production to the actual production in terms of fixed overhead costs. The fixed overhead cost per unit is given as $40, and the budgeted production was 500 units. Therefore, the budgeted fixed overhead is 500 units * $40/unit = $20,000. The actual fixed overhead remains as given, $19,250 for the actual production of 480 units. However, this also does not directly lead to the correct calculation as per the options provided.Given the misunderstanding in the initial explanation, let's correct the approach based on the standard method for calculating overhead volume variance, which is the difference between the budgeted overhead and the overhead applied based on standard rates for the actual production volume.The correct calculation should focus on the volume variance related to the difference in the number of units produced versus the number planned. The standard overhead cost (both variable and fixed) would be applied based on the number of units produced. However, the information provided and the calculation method seems to have been misunderstood in the initial explanation.The overhead volume variance is actually calculated as (Budgeted production volume - Actual production volume) * Standard fixed overhead rate per unit. Given the lack of clarity in the initial explanation and the misinterpretation of the provided data, the correct calculation should be:(Budgeted production of 500 units - Actual production of 480 units) * Fixed overhead rate ($40/unit) = 20 units * $40/unit = $800. This variance is unfavorable because actual production was less than budgeted production, meaning less overhead was applied than had been budgeted for.Therefore, the correct answer is based on understanding that the overhead volume variance reflects the difference in what was budgeted for production versus what was actually produced, applying the standard fixed overhead rate.

Haley Fans Manufactures and Distributes Circulators Budgeted Factory Overhead Was $32,000