The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows: The amount of the fixed factory overhead volume variance is
A) $2,000 favorable
B) $2,000 unfavorable
C) $2,500 unfavorable
D) $0

Question

The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows:  The amount of the fixed factory overhead volume variance is
A) $2,000 favorable 
B) $2,000 unfavorable 
C) $2,500 unfavorable 
D) $0

Quizplus · Accepted Answer

The fixed factory overhead volume variance is calculated as (standard hours - actual hours) x standard rate. In this case, the standard hours are 6,000 (2,500 units x 2 standard hours per unit) and the actual hours are 5,750. Therefore, the volume variance is (6,000 - 5,750) x $0.50 = $125 unfavorable. However, in the question the fixed overhead rate for the standard is $0.25 and the actual fixed overhead is $13,000. So, the fixed overhead volume variance is (6,000 - 5,750) x $0.25 = $62.50 unfavorable. As this variance is due to production being lower than expected, it is unfavorable to the company, hence the answer is B.

The Standard Costs and Actual Costs for Factory Overhead for the Manufacture