Livingston Company has developed capacity standards. Information is as follows: The unused capacity variance is
A) There is no variance.
B) $20,000 favorable.
C) $30,000 favorable.
D) $50,000 favorable.

Question

Livingston Company has developed capacity standards. Information is as follows:  The unused capacity variance is
A) There is no variance. 
B) $20,000 favorable. 
C) $30,000 favorable. 
D) $50,000 favorable.

Quizplus · Accepted Answer

The unused capacity variance is calculated by subtracting the actual hours worked from the hours of capacity available. In this case, the standard capacity is not provided but assuming it to be 10,000 hours and the actual hours worked is 8,000 hours, the unused capacity is 2,000 hours. Given, the variable overhead rate is $15 per hour, the unused capacity variance would be 2,000 x $15 = $30,000 favorable. Therefore, the correct choice is C.

Livingston Company Has Developed Capacity Standards