Freetown Corporation incurred fixed manufacturing costs of $26,000 during 2017. Other information for 2017 includes:
The budgeted denominator level is 2,600 units.
Units produced total 1,800 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
The production-volume variance is ________. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A) $6,000
B) $8,000
C) $14,000
D) $0

Question

Quizplus · Accepted Answer

The fixed manufacturing expense attributable to each unit produced is $10.00 ($26,000/2,600 units). The total quantity budgeted to be produced during the period was 2,600 units, whereas only 1,800 units were produced. Therefore there was a variance of 800 units. The production-volume variance is $8,000 ($10.00 × 800 units).

Freetown Corporation Incurred Fixed Manufacturing Costs of $26,000 During 2017