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

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 x (Denominator hours - Standard hours allowed for the actual output)
= $3 per DLH x [50,000 DLHs - (21,000 units x 3 DLHs per unit)]
= $3 per DLH x [50,000 DLHs - (63,000 DLHs)]
= $3 per DLH x [-13,000 DLHs]
= $39,000 F

The Forbes Corporation Uses a Standard Cost System in Which