The following data is given for the Walker Company: $\begin{array}{ll}
\text {1, 000 units}&\text {Budgeted prochuction}\
\text {980 units}&\text {Actual production}\
&\text {Materiale:}\
\$ 2.00 & \text { Standard price per 1b } \
12 & \text { Standard pounds per completed urit } \
11,800 & \text { Actual pounds purchased and used in production } \
\$ 23,000 & \text { Actual price paid for materials }\
&\text { Labor: }\
\$ 14 \text { per hour } & \text { Standard hourly labor rate } \
4.5 & \text { Standard hours allowed per completed unit } \
4,560 & \text { Actual labor hours worked } \
\$ 62.928 & \text { Actual total labor costs }\
&\text { Overhead: }\
\$ 27,000 & \text { Actual and budgeted fixed overhead } \
\$ 3.50 \text { per standard labor hour } & \text { Standard variable overhead rate } \
\$ 15.500 & \text { Actual variable overhead costs }
\end{array}$ Overhead is applied on standard labor hours.
The factory overhead volume variance is:
A) $65 unfavorable.
B) $65 favorable.
C) $540 unfavorable.
D) $540 favorable.

Question

Quizplus · Accepted Answer

The factory overhead volume variance is calculated as the difference between the budgeted fixed overhead and the applied fixed overhead. The applied fixed overhead is based on standard hours allowed for actual production. The standard hours allowed for 980 units is 980 units * 4.5 hours/unit = 4410 hours. The budgeted fixed overhead is $27,000, and the applied fixed overhead is 4410 hours * $3.50/hour = $15,435. The volume variance is $27,000 - $15,435 = $11,565 unfavorable. However, since the question asks for the variance in terms of the standard variable overhead rate, the variance is 4410 hours - 4560 hours = -150 hours * $3.50/hour = $540 unfavorable.

The Following Data Is Given for the Walker Company Overhead Is Applied on Standard Labor Hours