The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% normal production capacity. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000 and actual variable overhead was $170,000. Actual production was 11,700 units.
The fixed factory overhead volume variance is
A) $9,000 favorable
B) $9,000 unfavorable
C) $5,500 favorable
D) $5,500 unfavorable

Question

The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% normal production capacity. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000 and actual variable overhead was $170,000. Actual production was 11,700 units.
The  fixed  factory  overhead volume variance is
A) $9,000 favorable
B) $9,000 unfavorable
C) $5,500 favorable
D) $5,500 unfavorable

Quizplus · Accepted Answer

The fixed factory overhead volume variance is calculated as the difference between the budgeted fixed overhead and the applied fixed overhead based on actual production. The budgeted fixed overhead is $360,000 for 12,000 units, which means $30 per unit. For 11,700 units, the applied fixed overhead is 11,700 units x $30 = $351,000. The variance is $360,000 - $351,000 = $9,000 unfavorable.

The St Augustine Corporation Originally Budgeted for $360,000 of Fixed Overhead