Enberg Company,which applies overhead to production on the basis of machine hours,reported the following data for the period just ended:
Actual units produced: 14,800
Actual fixed overhead incurred: $791,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $780,000
Planned level of machine-hour activity: 60,000
If Enberg estimates four hours to manufacture a completed unit,the company's fixed-overhead volume variance would be:
A)$10,400 favorable.
B)$10,400 unfavorable.
C)$11,000 favorable.
D)$11,000 unfavorable.
E)some other amount.

Question

Quizplus · Accepted Answer

To calculate Fixed Overhead Volume Variance, we use the following formula:

Fixed Overhead Volume Variance = (Budgeted Fixed Overhead - Applied Fixed Overhead)

Applied Fixed Overhead = Actual Machine Hours * Standard Fixed Overhead Rate

Let's calculate the Applied Fixed Overhead first:

Actual machine hours = Actual units produced * Standard hours per unit
Actual machine hours = 14,800 units * 4 hours
Actual machine hours = 59,200 hours

Applied Fixed Overhead = Actual Machine Hours * Standard Fixed Overhead Rate
Applied Fixed Overhead = 59,200 hours * $13 per hour
Applied Fixed Overhead = $767,600

Now, let's calculate Fixed Overhead Volume Variance:

Fixed Overhead Volume Variance = (Budgeted Fixed Overhead - Applied Fixed Overhead) 
Fixed Overhead Volume Variance = ($780,000 - $767,600) 
Fixed Overhead Volume Variance = $12,400 unfavorable

Therefore, the correct answer is B) $10,400 unfavorable.

Enberg Company,which Applies Overhead to Production on the Basis of Machine