Formidable Company collected the following information: Standard costs per unit:
Variable overhead 4 machine hours @ $6 per machine hour
Fixed overhead 4 machine hours @ $10 per machine hour
Actual output 20,000 units
Denominator (normal capacity) output 21,000 units
Actual machine hours 79,000 machine hours
Actual variable overhead cost $540,000
Actual fixed overhead cost $810,000
Using the two variance method, what is the volume variance?
A) $6,000 (F)
B) $40,000 (F)
C) $40,000 (U)
D) $6,000 (U)

Question

Quizplus · Accepted Answer

Volume variance is calculated as follows:
Actual output - denominator output x fixed overhead rate per unit
= (20,000 - 21,000) x ($10/1) = $40,000 (U)
Therefore, the correct answer is C.

Formidable Company Collected the Following Information: Standard Costs Per Unit