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

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Quizplus · Accepted Answer

The volume variance is calculated as (Actual hours - Standard hours) x Standard variable factory overhead rate. In this case, the actual hours are 100% of productive capacity, which is 15,000 hours. The standard hours are 16,000 hours. The standard variable factory overhead rate is $2 per hour. Therefore, the volume variance is (15,000 - 16,000) x $2 = $3,000 favorable.

If the Standard to Produce Certain Quantity of Product Is