The following static budget is provided: $\begin{array}{lcc}
&\text { Per Unit}&\text { Total }\
\text { Sales } & \$ 60 & \$ 900,000 \
\text { Less variable costs: } & & \
\text { Manufacturing costs } & 30 & 450,000 \
\text { Selling and administrative costs } & \underline{ 10 }& \underline{ 150,000 }\
\text { Contribution margin } & \underline{ \$ 20 }& \$ 300,000\
\text { Less fixed costs: } &\
\text { Manufacturing costs } & &75,000 \
\text { Selling and administrative costs } &&\underline{ 125,000} \
\text { Total fixed costs } &&\underline{ 200,000}\
\text { Net income }&&\underline{ \$100,000}
\end{array}$
What will be the overall volume variance if 12,000 units are produced and sold?
A) $80,000 F
B) $80,000 U
C) $60,000 U
D) $160,000 U

Question

The following static budget is provided: $\begin{array}{lcc}
&\text { Per Unit}&\text { Total }\
\text { Sales } & \$ 60 & \$ 900,000 \
\text { Less variable costs: } & & \
\text { Manufacturing costs } & 30 & 450,000 \
\text { Selling and administrative costs } & \underline{ 10 }& \underline{ 150,000 }\
\text { Contribution margin } & \underline{ \$ 20 }& \$ 300,000\
\text { Less fixed costs: } &\
\text { Manufacturing costs } &  &75,000 \
\text { Selling and administrative costs } &&\underline{ 125,000}   \
\text { Total fixed costs } &&\underline{ 200,000}\
\text { Net income }&&\underline{ \$100,000}
\end{array}$
 What will be the overall volume variance if 12,000 units are produced and sold?
A) $80,000 F
B) $80,000 U
C) $60,000 U
D) $160,000 U

Quizplus · Accepted Answer

The overall volume variance can be calculated as (Actual Output - Budgeted Output) x Budgeted Rate.

From the given budget, we can see that the budgeted output is 10,000 units and the budgeted rate is $32 per unit.

So, the budgeted revenue is 10,000 x $32 = $320,000.

If 12,000 units are produced and sold, the actual output is 12,000 units and the actual revenue is 12,000 x $26 = $312,000.

The volume variance is ($12,000 - $10,000) x $32 = $64,000 U. (Since we produced more than we had originally budgeted for, this is favorable or Unfavorable).

Therefore, the best choice is C, $60,000 U.

The Following Static Budget Is Provided What Will Be the Overall Volume Variance If 12,000 Units