The following information was compiled by Gidget Incorporated:
$\begin{array} { l }
\text {Expected volume of production }&50,000 \text { units }\
\text {Actual volume of production }&47,000 \text { units }\
\text { Budgeted fixed overhead costs (for 50,000 budgeted units)}&\$200,000 \
\text {Actual fixed overhead costs }&\$220,000 \
\text { Actual variable overhead costs}&\$790,000 \
\text { Budgeted variable overhead costs (for 50,000 bud geted units)}&\$ 855,000\
\end{array}$

Assume the cost-allocation base for overhead costs is units of production.What is the production volume variance?
A) $6,000 Unfavorable
B) $12,000 Unfavorable
C) $20,000 Favorable
D) $20,000 Unfavorable

Question

The following information was compiled by Gidget Incorporated:
$\begin{array} { l  }
 \text {Expected volume of production }&50,000 \text { units }\
 \text {Actual volume of production }&47,000 \text { units }\
 \text { Budgeted fixed overhead costs (for 50,000 budgeted units)}&\$200,000 \
 \text {Actual fixed overhead costs }&\$220,000 \
 \text { Actual variable overhead costs}&\$790,000 \
 \text { Budgeted variable overhead costs (for 50,000 bud geted units)}&\$ 855,000\
\end{array}$

Assume the cost-allocation base for overhead costs is units of production.What is the production volume variance?
A) $6,000 Unfavorable
B) $12,000 Unfavorable
C) $20,000 Favorable
D) $20,000 Unfavorable

Quizplus · Accepted Answer

The production volume variance is calculated as the difference between the budgeted fixed overhead costs for the actual volume of production and the budgeted fixed overhead costs. The budgeted fixed overhead cost per unit is $200,000 / 50,000 units = $4 per unit. For the actual production of 47,000 units, the budgeted fixed overhead would be 47,000 units * $4 = $188,000. The variance is then $200,000 (budgeted for 50,000 units) - $188,000 (budgeted for actual production of 47,000 units) = $12,000 Unfavorable.

The Following Information Was Compiled by Gidget Incorporated Assume the Cost-Allocation Base for Overhead Costs Is Units of l