The amount of the fixed factory overhead volume variance is
A) $2,000 favorable
B) $2,000 unfavorable
C) $2,500 unfavorable
D) $0

Question

Quizplus · Accepted Answer

The fixed factory overhead volume variance measures the difference between the budgeted fixed factory overhead and the fixed factory overhead applied based on the actual production volume. If the actual production volume is less than budgeted, then there will be under-absorption of fixed factory overhead resulting in an unfavorable variance. In this case, the budgeted fixed factory overhead was $900,000 for 50,000 units, or $18 per unit. The actual production volume was 45,000 units, resulting in fixed factory overhead applied of $810,000 (45,000 units x $18 per unit). The fixed factory overhead volume variance is calculated as follows:
Budgeted fixed factory overhead - applied fixed factory overhead = $900,000 - $810,000 = $90,000 unfavorable
Therefore, the correct answer is B) $2,000 unfavorable (the other options are either too high or incorrect).

The Amount of the Fixed Factory Overhead Volume Variance Is