(Appendix 10A) Tierman Incorporated makes a single product--a cooling coil used in commercial refrigerators. 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) $43,560 U
B) $43,560 F
C) $29,560 F
D) $29,560 U

Question

(Appendix 10A) Tierman Incorporated makes a single product--a cooling coil used in commercial refrigerators. 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) $43,560 U 
B) $43,560 F 
C) $29,560 F 
D) $29,560 U

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $221,700/30,000 machine-hours
= $7.39 per machine-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $221,700 - ($7.39 per machine-hour × 34,000 machine-hours)
= $221,700 - ($251,260)
= $29,560 F
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $7.39 per machine-hour x (30,000 machine-hours - 34,000 machine-hours)
= $7.39 per machine-hour x (30,000 machine-hours - 34,000 machine-hours)
= $7.39 per machine-hour x (-4,000 hours)
= $29,560 F

(Appendix 10A) Tierman Incorporated Makes a Single Product--A Cooling Coil