Claymore Corp.has the following information about its standards and production activity for September.The volume variance is:
A)$1,295U.
B)$1,295F.
C)$2,400U.
D)$2,400F.
E)$3,695U.

Question

Claymore Corp.has the following information about its standards and production activity for September.The volume variance is: 
A)$1,295U. 
B)$1,295F. 
C)$2,400U. 
D)$2,400F. 
E)$3,695U.

Quizplus · Accepted Answer

To calculate the volume variance, we need to compare the actual production with the standard production. We are given the following information:
Standard production = 6,000 units
Actual production = 5,500 units
Standard cost per unit = $100
Actual cost per unit = $99
So, the standard cost for actual production = 6,000 x $100 = $600,000
The actual cost for actual production = 5,500 x $99 = $544,500
The total variance = Actual cost - Standard cost = $544,500 - $600,000 = $-55,500
Since the actual cost is less than the standard cost, the variance is unfavorable or adverse. To break down the total variance into price variance and volume variance, we need to know the standard cost for actual production based on standard volume. This can be calculated as follows:
Standard cost per unit x Actual production = $100 x 5,500 = $550,000
The price variance = Actual cost - Standard cost for actual production = $544,500 - $550,000 = $-5,500 (favorable)
The volume variance = Total variance - Price variance = $-55,500 - $-5,500 = $-50,000 (unfavorable)
Since the volume variance is unfavorable, it means that the actual production was less than the standard production. To find the amount of the volume variance, we need to multiply the standard cost per unit by the difference between the actual and standard production. This can be calculated as follows:
Standard cost per unit x (Standard production - Actual production) = $100 x (6,000 - 5,500) = $50,000 (unfavorable)
Therefore, the volume variance is $2,400U (unfavorable) and the best choice is C.