Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape: $$\begin{array} { l r }
\text { Material (3.50 ounces at } \$ 1.30 \text { per ounce) } & \$ 4.55 \
\text { Labor (0.30 hour at } \$ 12.00 \text { per hour) } & 3.60 \
\text { Overhead } & 2.20 \
\text { Total } & \$ 10.35
\end{array}$$ At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the year.Overhead is allocated based on the number of cases of tape produced.Annual fixed overhead is budgeted at $56,000 and the variable overhead costs are budgeted at $1.50 per case.The following information summarizes the results for 2017:
-Actual production, 75,000 cases
-Purchased 275,000 ounces of material at a total cost of $343,750
-Used 266,250 ounces of material in production
-Employees worked 22,000 hours, total labor cost $275,000
-Actual overhead incurred, $175,000
How much is the overhead volume variance for 2017?
A)$6,500 unfavorable
B)$3,500 unfavorable
C)$10,000 unfavorable
D)$3,000 unfavorable

Question

Scotch Brand Products produces packaging tape and has determined the following to be its standard cost of producing one case of budget packaging tape: $$\begin{array} { l r } 
\text { Material (3.50 ounces at } \$ 1.30 \text { per ounce) } & \$ 4.55 \
\text { Labor (0.30 hour at } \$ 12.00 \text { per hour) } & 3.60 \
\text { Overhead } & 2.20 \
\text { Total } & \$ 10.35
\end{array}$$ At the start of 2017, Scotch Brand planned to produce 80,000 cases of tape during the year.Overhead is allocated based on the number of cases of tape produced.Annual fixed overhead is budgeted at $56,000 and the variable overhead costs are budgeted at $1.50 per case.The following information summarizes the results for 2017:
-Actual production, 75,000 cases
-Purchased 275,000 ounces of material at a total cost of $343,750
-Used 266,250 ounces of material in production
-Employees worked 22,000 hours, total labor cost $275,000
-Actual overhead incurred, $175,000
How much is the overhead volume variance for 2017?
A)$6,500 unfavorable
B)$3,500 unfavorable
C)$10,000 unfavorable
D)$3,000 unfavorable

Quizplus · Accepted Answer

The overhead volume variance is calculated as the difference between the budgeted overhead for the actual production level and the budgeted overhead for the planned production level. The budgeted overhead consists of fixed and variable components. The fixed overhead is $56,000 for the year, and the variable overhead is budgeted at $1.50 per case.Budgeted overhead for actual production (75,000 cases) = Fixed overhead + (Variable overhead rate * Actual production)= $56,000 + ($1.50 * 75,000)= $56,000 + $112,500= $168,500Budgeted overhead for planned production (80,000 cases) = Fixed overhead + (Variable overhead rate * Planned production)= $56,000 + ($1.50 * 80,000)= $56,000 + $120,000= $176,000Overhead volume variance = Budgeted overhead for actual production - Budgeted overhead for planned production= $168,500 - $176,000= -$7,500 unfavorableHowever, none of the options exactly match the calculated value. It's possible there was a mistake in the calculation or interpretation of the options provided. Given the options, the closest to the calculated variance would be considered, but without an exact match, the explanation provided is based on standard variance calculation methods. Re-evaluating the calculation for accuracy or considering the context of the options might be necessary.

Scotch Brand Products Produces Packaging Tape and Has Determined the Following