Guadalupe Manufacturing Company uses a standard cost system with direct labor-hours as the activity base for overhead.Last year,Guadalupe applied a total of $936,000 of fixed manufacturing overhead cost to the products it produced.The following data relate to production for the year: $\begin{array}{llcc}
\text { Denominator activity level in direct labor-hours............... } &80,000 \
\text { Standard direct labor-hours allowed for actual output...... } &75,000\
\text { Actual number of direct labor-hours incurred................... } &78,000\
\end{array}$
What was Guadalupe's fixed manufacturing overhead volume variance?
A)$23,400 favorable
B)$62,400 unfavorable
C)$37,440 unfavorable
D)$58,500 favorable

Question

Guadalupe Manufacturing Company uses a standard cost system with direct labor-hours as the activity base for overhead.Last year,Guadalupe applied a total of $936,000 of fixed manufacturing overhead cost to the products it produced.The following data relate to production for the year: $\begin{array}{llcc}
  \text { Denominator activity level in direct labor-hours............... } &80,000  \
 \text {  Standard direct labor-hours allowed for actual output...... } &75,000\
 \text {  Actual number of direct labor-hours incurred................... } &78,000\
\end{array}$
 What was Guadalupe's fixed manufacturing overhead volume variance?
A)$23,400 favorable
B)$62,400 unfavorable
C)$37,440 unfavorable
D)$58,500 favorable

Quizplus · Accepted Answer

The fixed manufacturing overhead volume variance is calculated as: (Denominator activity level - Standard hours allowed for actual output) x Fixed overhead rate per hour. The fixed overhead rate per hour is $936,000 / 80,000 = $11.70. The variance is (80,000 - 75,000) x $11.70 = $58,500 unfavorable.

Guadalupe Manufacturing Company Uses a Standard Cost System with Direct