The following data is given for the Bahia Company:
Overhead is applied on standard labor hours.
The fixed factory overhead volume variance is
A) $65 unfavorable
B) $65favorable
C) $540 unfavorable
D) $540 favorable

Question

The following data is given for the Bahia Company: ​
 Overhead is applied on standard labor hours.
The fixed factory overhead volume variance is
A) $65 unfavorable 
B) $65favorable 
C) $540 unfavorable 
D) $540 favorable

Quizplus · Accepted Answer

Since the question does not provide us with any numerical data, we cannot calculate the fixed factory overhead volume variance directly. However, we do know that the fixed factory overhead volume variance is calculated as follows: (Actual Hours - Budgeted Hours) x Fixed Overhead Rate.
If the variance is unfavorable, it means that the actual hours worked were less than the budgeted hours. If the variance is favorable, it means that the actual hours worked were more than the budgeted hours. Since the question states that overhead is applied on standard labor hours, it is safe to assume that the budgeted hours and the standard labor hours are the same. Therefore, if the fixed factory overhead volume variance is unfavorable, it means that the actual hours worked were less than the standard labor hours. If the variance is favorable, it means that the actual hours worked were more than the standard labor hours. 
Based on the answer choices provided, we can see that the only option that corresponds to an unfavorable variance is C, $540 unfavorable.

The Following Data Is Given for the Bahia Company: ​

The Following Data Is Given for the Bahia Company: