(Appendix 11A)The Forbes Corporation uses a standard cost system in which overhead costs are applied to products on the basis of standard direct labor-hours (DLHs).The following data applied to the company's activities for June: The volume variance for June is:
A)$44, 954 Unfavorable
B)$39, 000 Favorable
C)$39, 000 Unfavorable
D)$44, 954 Favorable

Question

(Appendix 11A)The Forbes Corporation uses a standard cost system in which overhead costs are applied to products on the basis of standard direct labor-hours (DLHs).The following data applied to the company's activities for June:  The volume variance for June is:
A)$44, 954 Unfavorable 
B)$39, 000 Favorable 
C)$39, 000 Unfavorable 
D)$44, 954 Favorable

Quizplus · Accepted Answer

Budget variance = Actual fixed overhead - Budgeted fixed overhead
$11, 450 U = $161, 450 - Budgeted fixed overhead
$11, 450 = $161, 450 - Budgeted fixed overhead
Budgeted fixed overhead = $161, 450 - $11, 450
Budgeted fixed overhead = $150, 000
Fixed component of the predetermined overhead rate = Estimated fixed overhead cost ÷ Estimated total amount of the allocation base = $150, 000 ÷ 50, 000 DLHs = $3 per DLH
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output)
= $3 per DLH × [50, 000 DLHs - (21, 000 units × 3 DLHs per unit)]
= $3 per DLH × [50, 000 DLHs - (63, 000 DLHs)]
= $3 per DLH × [-13, 000 DLHs]
= $39, 000 F

(Appendix 11A)The Forbes Corporation Uses a Standard Cost System in Which