Tycoon Manufacturing uses a standard costing system. The standard time to produce one unit is 4 hours, and normal production is 5,000 units monthly. Overhead costs were estimated to be $250,000. The standard variable overhead rate is $5 per machine hour. During October the following results were recorded:
$\begin{array} { l l }
\text { Units produced } & 4,900 \
\text { Units sold } & 4,600 \
\text { Machine hours required } & 20,500 \
\text { Actual overhead cost } & \$ 248,000
\end{array}$
The fixed overhead production volume variance was:
A) $3,000 F
B) $4,500 U
C) $1,500 F
D) $3,000 U

Question

Tycoon Manufacturing uses a standard costing system. The standard time to produce one unit is 4 hours, and normal production is 5,000 units monthly. Overhead costs were estimated to be $250,000. The standard variable overhead rate is $5 per machine hour. During October the following results were recorded:
 $\begin{array} { l l } 
\text { Units produced } & 4,900 \
\text { Units sold } & 4,600 \
\text { Machine hours required } & 20,500 \
\text { Actual overhead cost } & \$ 248,000
\end{array}$ 
The fixed overhead production volume variance was:
A) $3,000 F
B) $4,500 U
C) $1,500 F
D) $3,000 U

Quizplus · Accepted Answer

The fixed overhead production volume variance is calculated as (Actual production - Normal production) x Fixed overhead rate per unit. Here, (4,900 - 5,000) x ($250,000 / 5,000) = -100 x $50 = $5,000 U. However, since the choices provided do not match this calculation, the closest choice is $3,000 U.

Tycoon Manufacturing Uses a Standard Costing System The Fixed Overhead Production Volume Variance Was: A) $3,000 F

Tycoon Manufacturing Uses a Standard Costing System The Fixed Overhead Production Volume Variance Was:
A) $3,000 F