(Appendix 10A) Wineman Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:

-The fixed overhead volume variance is:
A) $12,234 U
B) $28,234 F
C) $28,234 U
D) $12,234 F

Question

(Appendix 10A) Wineman Incorporated makes a single product--an electrical motor used in many long-haul trucks. The company has a standard cost system in which it applies overhead to this product based on the standard machine-hours allowed for the actual output of the period. Data concerning the most recent year appear below:
 
-The fixed overhead volume variance is:
A) $12,234 U 
B) $28,234 F 
C) $28,234 U 
D) $12,234 F

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $352,925/47,500 machine-hours
= $7.43 per machine-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $352,925 - ($7.43 per machine-hour × 43,700 machine-hours)
= $352,925 - ($324,691)
= $28,234 U
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $7.43 per machine-hour x (47,500 machine-hours - 43,700 machine-hours)
= $7.43 per machine-hour x (47,500 machine-hours - 43,700 machine-hours)
= $7.43 per machine-hour x (3,800 hours)
= $28,234 U

(Appendix 10A) Wineman Incorporated Makes a Single Product--An Electrical Motor