Enberg Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended:
Actual units produced: 14,800
Actual fixed overhead incurred: $791,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $780,000
Planned level of machine-hour activity: 60,000
If Enberg estimates four hours to manufacture a completed unit, the company's fixed-overhead volume variance would be:
A) $10,400 favorable.
B) $10,400 unfavorable.
C) $11,000 favorable.
D) $11,000 unfavorable.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

The fixed-overhead volume variance is calculated as (Planned machine hours - Actual machine hours) x Standard fixed overhead rate. Planned machine hours = 60,000. Actual machine hours = 14,800 units x 4 hours/unit = 59,200. Volume variance = (60,000 - 59,200) x $13 = $10,400 unfavorable.

Enberg Company, Which Applies Overhead to Production on the Basis