Croissant Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows 1 direct labor hour per unit. During 2014, Croissant produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor. What is Croissant's fixed overhead volume variance for 2014?
A) $60,000 (U)
B) $24,000 (F)
C) $36,000 (U)
D) $60,000 (F)

Question

Quizplus · Accepted Answer

The fixed overhead volume variance is calculated as (Budgeted fixed overhead - Applied fixed overhead). Applied fixed overhead is based on standard hours allowed for actual production, which is 110,000 units * 1 hour/unit = 110,000 hours. Applied fixed overhead = 110,000 hours * $6/hour = $660,000. Volume variance = $600,000 - $660,000 = $60,000 (Favorable).

Croissant Company's Standard Fixed Overhead Cost Is $6 Per Direct