Steinhagen Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below: The company based its original budget on 2,600 machine-hours. The company actually worked 2,790 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?
A)$5,148 Favorable
B)$5,148 Unfavorable
C)$2,717 Favorable
D)$2,717 Unfavorable

Question

Steinhagen Corporation applies manufacturing overhead to products on the basis of standard machine-hours. Budgeted and actual overhead costs for the most recent month appear below:  The company based its original budget on 2,600 machine-hours. The company actually worked 2,790 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,960 machine-hours. What was the overall fixed manufacturing overhead volume variance for the month?
A)$5,148 Favorable 
B)$5,148 Unfavorable 
C)$2,717 Favorable 
D)$2,717 Unfavorable

Quizplus · Accepted Answer

Fixed manufacturing overhead volume variance can be calculated using the formula:

Fixed manufacturing overhead volume variance = Budgeted fixed overhead – (Actual machine hours × Fixed overhead rate)

Budgeted fixed overhead = $118,800 
Actual machine hours = 2,790 
Fixed overhead rate = ($118,800 ÷ 2,600) = $45.69 per machine-hour

Fixed manufacturing overhead volume variance = $118,800 – (2,790 × $45.69) 
Fixed manufacturing overhead volume variance = $5,148 Favorable

Steinhagen Corporation Applies Manufacturing Overhead to Products on the Basis