Allende Company has developed capacity standards.Information is as follows for a value-added activity:
- The unused capacity variance is
A) $20,000 favorable.
B) $40,000 favorable.
C) $60,000 favorable.
D) There is no variance.

Question

Allende Company has developed capacity standards.Information is as follows for a value-added activity: 
- The unused capacity variance is
A) $20,000 favorable. 
B) $40,000 favorable. 
C) $60,000 favorable. 
D) There is no variance.

Quizplus · Accepted Answer

The unused capacity variance is calculated as the difference between the budgeted capacity and the actual capacity used, multiplied by the fixed overhead rate. If the unused capacity results in lower costs than budgeted, it is considered favorable.

Allende Company Has Developed Capacity Standards