(Appendix 10A) Fleming 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) $63,495 U
B) $45,495 F
C) $45,495 U
D) $63,495 F

Question

(Appendix 10A) Fleming 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) $63,495 U 
B) $45,495 F 
C) $45,495 U 
D) $63,495 F

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $190,485/25,500 labor-hours
= $7.47 per labor-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $190,485 - ($7.47 per labor-hour × 17,000 labor-hours)
= $190,485 - ($126,990)
= $63,495 U
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $7.47 per labor-hour x (25,500 labor-hours - 17,000 labor-hours)
= $7.47 per labor-hour x (25,500 labor-hours - 17,000 labor-hours)
= $7.47 per labor-hour x (8,500 hours)
= $63,495 U

(Appendix 10A) Fleming Incorporated Makes a Single Product--A Critical Part