Budgeted overhead for Mengotti Company at normal capacity of 30,000 direct labor hours is $4.50 per hour variable and $3 per hour fixed. In May, $232,500 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance is
A) $6,000 favorable.
B) $8,250 favorable.
C) $3,750 favorable.
D) $7,500 favorable.

Question

Quizplus · Accepted Answer

The overhead volume variance is calculated as (Standard hours allowed - Normal capacity hours) x Fixed overhead rate. Here, (32,000 - 30,000) x $3 = $6,000 favorable.

Budgeted Overhead for Mengotti Company at Normal Capacity of 30,000