At the start of 2014, Capital Cemetery determined its standard labor cost to be 2.5 hours for each cemetery plot prepared at $14.00 per hour. The budget for variable overhead was $8 per plot and budgeted fixed overhead was $15,000 for the year. Overhead is applied based on the number of plots prepared. The company expects to prepare 5,000 plots during 2014. During 2014, the actual cost of labor was $14.30 per hour. Capital prepared 4,900 cemetery plots requiring 11,700 direct labor hours. Actual overhead for the year was $52,100. How much is the overhead volume variance?

Question

Quizplus · Accepted Answer

Overhead volume variance = Actual overhead - (Budgeted fixed overhead + (Budgeted variable overhead rate x Actual direct labor hours))

= $52,100 - ($15,000 + ($8 x 11,700/14.30))

= $52,100 - ($15,000 + $6,662.94)

= $30,437.06

Since the actual overhead is higher than what was expected for the number of plots prepared, the variance is unfavorable. Therefore, the answer is choice B, $300 unfavorable.

At the Start of 2014, Capital Cemetery Determined Its Standard