Exhibit 10-1
Flatland Company applies fixed manufacturing overhead costs to products based on direct labor hours.Information for the month of April appears below.Flatland expects to produce and sell 18,000 units for the month.
Below is budget information for Flatland Company.
$$\begin{array} { l l }
\text { Budgeted fixed overhead costs } & \$ 270,000 \
\text { Budgeted direct labor hours } & 90,000 \text { hours } \
\text { Standard direct labor hours per unit } & 5 \text { hours per unit } \
\text { Actual production } & 17,000 \
\text { Actual fixed overhead costs } & \$ 280,000
\end{array}$$
-Refer to Exhibit 10-1.Based on this information,what is the fixed overhead production volume variance?
A)$15,000 unfavorable
B)$10,000 favorable
C)$15,000 favorable
D)$10,000 unfavorable
E)None of the answer choices is correct.

Question

Exhibit 10-1
Flatland Company applies fixed manufacturing overhead costs to products based on direct labor hours.Information for the month of April appears below.Flatland expects to produce and sell 18,000 units for the month.
Below is budget information for Flatland Company.
 $$\begin{array} { l l } 
\text { Budgeted fixed overhead costs } & \$ 270,000 \
\text { Budgeted direct labor hours } & 90,000 \text { hours } \
\text { Standard direct labor hours per unit } & 5 \text { hours per unit } \
\text { Actual production } & 17,000 \
\text { Actual fixed overhead costs } & \$ 280,000
\end{array}$$
-Refer to Exhibit 10-1.Based on this information,what is the fixed overhead production volume variance?
A)$15,000 unfavorable
B)$10,000 favorable
C)$15,000 favorable
D)$10,000 unfavorable
E)None of the answer choices is correct.

Quizplus · Accepted Answer

The fixed overhead production volume variance is calculated as the difference between the budgeted fixed overhead costs and the fixed overhead costs applied to actual production. The budgeted fixed overhead cost rate per direct labor hour is $270,000 / 90,000 hours = $3 per hour. The standard hours for actual production (17,000 units) are 17,000 units * 5 hours per unit = 85,000 hours. The fixed overhead costs applied to actual production are 85,000 hours * $3 per hour = $255,000. The variance is the budgeted fixed overhead ($270,000) minus the applied fixed overhead ($255,000), which equals $15,000 unfavorable.

Exhibit 10-1 Flatland Company Applies Fixed Manufacturing Overhead Costs to Products

Exhibit 10-1
Flatland Company Applies Fixed Manufacturing Overhead Costs to Products