(Appendix 11A)Derf Corporation uses a standard cost system in which it applies manufacturing overhead on the basis of standard direct labor-hours.Two direct labor-hours are required for each unit produced.The denominator activity was set at 9, 000 units.Manufacturing overhead was budgeted at $135, 000 for the period;20 percent of this cost was fixed.The 17, 200 hours worked during the period resulted in production of 8, 500 units.Variable manufacturing overhead cost incurred was $108, 500 and fixed manufacturing overhead cost was $28, 000. The fixed manufacturing overhead volume variance for the period was:
A)$750 Unfavorable
B)$2, 500 Unfavorable
C)$1, 500 Unfavorable
D)$1, 000 Unfavorable

Question

Quizplus · Accepted Answer

Fixed component of the predetermined overhead rate = (0.2 × $135, 000)÷ (9, 000 units × 2 hours per unit)= $27, 000 ÷ 18, 000 hours = $1.50 per hour
Standard hours allowed for the actual output = 2.00 hours per unit × 8, 500 units = 17, 000 hours
Volume variance = Fixed component of the predetermined overhead rate × (Denominator hours - Standard hours allowed for the actual output)
= $1.50 per hour × (18, 000 hours - 17, 000 hours)
= $1.50 per hour × (1, 000 hours)
= $1, 500 U

(Appendix 11A)Derf Corporation Uses a Standard Cost System in Which