If the standard to produce a given amount of product is 16,000 hours at a factory overhead rate of $5 ($3 fixed,$2 variable),actual variable factory overhead was $26,400,actual fixed factory overhead was $45,000,and 100% of productive capacity is 15,000 hours,the volume variance was $3,000 favorable.

Question

Quizplus · Accepted Answer

Volume variance = (actual hours produced - budgeted hours) * budgeted overhead rate
Budgeted overhead rate = $5
Budgeted hours for 100% capacity = 16,000 hours
Budgeted overhead for 100% capacity = $80,000 ($3 * 16,000 + $2*16,000)
Actual variable factory overhead = $26,400
Actual fixed factory overhead = $45,000

Actual hours produced = (actual variable factory overhead / variable overhead rate) + (actual fixed factory overhead / fixed overhead rate)
Actual hours produced = ($26,400 / $2) + ($45,000 / $3) = 13,200 + 15,000 = 28,200

Volume variance = (28,200 - 16,000) * $5 = $62,000 (unfavorable)
However, the question states that the volume variance was actually $3,000 favorable. This means that there was an error in the question or that the calculations are incorrect.

If the Standard to Produce a Given Amount of Product