If the standard to produce a given amount of product is 12,000 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 $9,000 favorable.

Question

Quizplus · Accepted Answer

To calculate the volume variance, we need to compare the actual hours worked to the standard hours required to produce the same amount of product.

Actual hours = 15,000 hours (100% of productive capacity)

Standard hours = 12,000 hours

Volume variance = (Actual hours - Standard hours) x Variable overhead rate

Volume variance = (15,000 - 12,000) x $2 = $6,000 unfavorable

Therefore, the statement that the volume variance was $9,000 favorable is false.

If the Standard to Produce a Given Amount of Product