The Malcolm Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). The standards call for 3 hours of direct labor per unit produced. The following data pertain to the company's manufacturing overhead for the month of July:
-The volume variance for July is:
A)$1,131 F
B)$900 F
C)$1,131 U
D)$900 U

Question

The Malcolm Company uses a standard cost system in which manufacturing overhead costs are applied to products on the basis of standard direct labor-hours (DLHs). The standards call for 3 hours of direct labor per unit produced. The following data pertain to the company's manufacturing overhead for the month of July: 
-The volume variance for July is:
A)$1,131 F 
B)$900 F 
C)$1,131 U 
D)$900 U

Quizplus · Accepted Answer

Volume variance = Budgeted fixed overhead cost - Fixed overhead applied to work in process
= $25,200 - ((2,900 units F1F1F1S1F1F1F10 3 hours per unit)F1F1F1S1F1F1F10 $3.00 per hour)
= $25,200 - (8,700 hours F1F1F1S1F1F1F10 $3.00 per hour)
= $25,200 - $26,100 = $900 F

The Malcolm Company Uses a Standard Cost System in Which