(Appendix 10A) Chojnowski 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 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) $52,195 U
B) $65,195 U
C) $65,195 F
D) $52,195 F

Question

(Appendix 10A) Chojnowski 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 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) $52,195 U 
B) $65,195 U 
C) $65,195 F 
D) $52,195 F

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = $325,975/42,500 labor-hours
= $7.67 per labor-hour
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $325,975 - ($7.67 per labor-hour × 34,000 labor-hours)
= $325,975 - ($260,780)
= $65,195 U
or
Volume variance = Fixed component of the predetermined overhead rate x (Denominator hours - Standard hours allowed for the actual output)
= $7.67 per labor-hour x (42,500 labor-hours - 34,000 labor-hours)
= $7.67 per labor-hour x (42,500 labor-hours - 34,000 labor-hours)
= $7.67 per labor-hour x (8,500 hours)
= $65,195 U

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