The following static budget is provided: $\begin{array}{lc}
&\text { Per Unit }&\text {Total }\
\text { Sales }&\$50&\$800,000\
\text { Less variable costs: }\
\text { Manufacturing costs } &20 & 320,000 \
\text { Selling and administrative costs } & \underline{10} & \underline{160,000 }\
\text { Contribution margin }&\$20&\$320,000\
\text { Less fixed costs: }\
\text { Manufacturing costs } && 84,000 \
\text { Selling and administrative costs } && \underline{ 130,000 }\
\text { Total fixed costs } && \underline{214,000 }\
\text { Net income } && \underline{\$ 106,000}
\end{array}$
What will be the overall volume variance if 13,700 units are produced and sold?
A) $46,000 F
B) $23,000 F
C) $46,000 U
D) $115,000 U

Question

The following static budget is provided: $\begin{array}{lc}
&\text { Per Unit }&\text {Total }\
\text { Sales }&\$50&\$800,000\
\text { Less variable costs: }\
 \text { Manufacturing costs } &20 & 320,000 \
 \text { Selling and administrative costs } &  \underline{10} &  \underline{160,000 }\
\text { Contribution margin }&\$20&\$320,000\
\text { Less fixed costs: }\
\text { Manufacturing costs } && 84,000 \
\text { Selling and administrative costs } && \underline{ 130,000 }\
\text { Total fixed costs } &&  \underline{214,000 }\
\text { Net income } &&  \underline{\$ 106,000}
\end{array}$
 What will be the overall volume variance if 13,700 units are produced and sold?
A) $46,000 F
B) $23,000 F
C) $46,000 U
D) $115,000 U

Quizplus · Accepted Answer

The volume variance can be calculated as follows:
Actual units sold - Budgeted units sold x Budgeted contribution margin per unit

Actual units sold = 13,700
Budgeted units sold = 14,000
Budgeted contribution margin per unit = ($2,800,000 ÷ 14,000) = $200

Volume variance = (13,700 - 14,000) x $200
Volume variance = $46,000 U (unfavorable)

Therefore, the best choice is C, which is $46,000 U.

The Following Static Budget Is Provided What Will Be the Overall Volume Variance If 13,700 Units