Zero Company's standard factory overhead rate is $3.75 per direct labor hour (DLH), calculated at 90% capacity = 900 standard DLHs. In December, the company operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the actual factory overhead cost incurred was $3,800 for 840 actual DLHs, of which $1,300 was fixed factory overhead.

What is the fixed overhead production volume variance, to the nearest whole dollar, for Zero Company in December?
A) $0.
B) $150 unfavorable.
C) $225 favorable.
D) $425 unfavorable.
E) $650 unfavorable.

Question

Zero Company's standard factory overhead rate is $3.75 per direct labor hour (DLH) , calculated at 90% capacity = 900 standard DLHs. In December, the company operated at 80% of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of capacity is $3,150, of which $1,350 is fixed overhead. For December, the actual factory overhead cost incurred was $3,800 for 840 actual DLHs, of which $1,300 was fixed factory overhead.

What is the fixed overhead production volume variance, to the nearest whole dollar, for Zero Company in December?

What is the fixed overhead production volume variance, to the nearest whole dollar, for Zero Company in December?
A) $0.
B) $150 unfavorable.
C) $225 favorable.
D) $425 unfavorable.
E) $650 unfavorable.

Quizplus · Accepted Answer

To calculate the fixed overhead production volume variance, we need to compare the actual fixed overhead cost incurred with the budgeted fixed overhead cost based on actual production.

Budgeted fixed overhead cost at 800 standard DLHs (80% capacity) = $1,350 
Actual fixed overhead cost incurred for 840 actual DLHs = $1,300

Therefore, the fixed overhead production volume variance is:

$1,300 (actual fixed overhead cost) - $1,350 (budgeted fixed overhead cost) = $150 unfavorable variance.

Option B is the correct answer.

Zero Company's Standard Factory Overhead Rate Is $3