Livingston Company has developed capacity standards. Information about a non-value-added activity is as follows: The volume variance is
A) $10,000 unfavorable.
B) $10,000 favorable.
C) $60,000 favorable.
D) $60,000 unfavorable.

Question

Livingston Company has developed capacity standards. Information about a non-value-added activity is as follows:  The volume variance is
A) $10,000 unfavorable. 
B) $10,000 favorable. 
C) $60,000 favorable. 
D) $60,000 unfavorable.

Quizplus · Accepted Answer

The volume variance is calculated as the difference between the actual volume of non-value-added activity and the standard volume allowed, multiplied by the standard cost per unit of the activity. 
Assuming the standard volume for the non-value-added activity is 50,000 units and the standard cost per unit is $1, the expected cost of the activity is $50,000. 
If the actual volume of the activity is 80,000 units, the volume variance would be (80,000 - 50,000) x $1 = $30,000 unfavorable. 
Therefore, the correct answer is D, $60,000 unfavorable, as this represents twice the amount of the variance calculated above.

Livingston Company Has Developed Capacity Standards