Dapice Incorporated makes a single product--a critical part used in commercial airline seats.The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period.Data concerning the most recent year appear below:
The fixed overhead volume variance is:
A) $5,121 U
B) $5,121 F
C) $21,121 F
D) $21,121 U

Question

Dapice Incorporated makes a single product--a critical part used in commercial airline seats.The company has a standard cost system in which it applies overhead to this product based on the standard labor-hours allowed for the actual output of the period.Data concerning the most recent year appear below:
 The fixed overhead volume variance is:
A) $5,121 U 
B) $5,121 F 
C) $21,121 F 
D) $21,121 U

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $76,815/13,500 labor-hours
= $5.69 per labor-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $76,815 - ($5.69 per labor-hour × 14,400 labor-hours)
= $76,815 - ($81,936)
= $5,121 F
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $5.69 per labor-hour x (13,500 labor-hours - 14,400 labor-hours)
= $5.69 per labor-hour x (13,500 labor-hours - 14,400 labor-hours)
= $5.69 per labor-hour x (-900 hours)
= $5,121 F

Dapice Incorporated Makes a Single Product--A Critical Part Used in Commercial