Robert Inc.uses the standard costing method.The company's main product is a fine-quality headphones that normally takes 0.5 hour to produce.Normal annual capacity is 5,000 direct labor hours,and budgeted fixed overhead costs for the year were $8,750.During the year,the company produced and sold 5,800 units.Actual fixed overhead costs were $6,000.
-Using the information provided for Robert Inc,compute the fixed overhead volume variance.
A)$2,750 (F)
B)$925 (U)
C)$5,800 (U)
D)$3,675 (U)

Question

Robert Inc.uses the standard costing method.The company's main product is a fine-quality headphones that normally takes 0.5 hour to produce.Normal annual capacity is 5,000 direct labor hours,and budgeted fixed overhead costs for the year were $8,750.During the year,the company produced and sold 5,800 units.Actual fixed overhead costs were $6,000. 
-Using the information provided for Robert Inc,compute the fixed overhead volume variance.
A)$2,750 (F)
B)$925 (U)
C)$5,800 (U)
D)$3,675 (U)

Quizplus · Accepted Answer

Fixed overhead volume variance can be calculated using the following formula:
Fixed overhead volume variance = (Budgeted fixed overhead costs - Actual fixed overhead costs) / Standard direct labor hours x Actual output

Budgeted fixed overhead costs = $8,750
Actual fixed overhead costs = $6,000
Standard direct labor hours per unit = 0.5 hour
Standard direct labor hours for 5,800 units = 5,800 x 0.5 = 2,900 hours
Actual output = 5,800 units

Fixed overhead volume variance = ($8,750 - $6,000) / 2,900 x 5,800
Fixed overhead volume variance = $2,750 (F)

Therefore, the best choice is D, $3,675 (U) is incorrect as it is a positive number whereas variance here is negative (Favourable)