The management of XYZ Company is analyzing fixed manufacturing overhead variances for the fiscal period just ended. For the period, XYZ had budgeted $400,000 in total fixed manufacturing overhead but had actually incurred $500,000. Also, the standard fixed overhead rate was $10 per machine hour and XYZ had allowed for 25,000 machine hours.
What is XYZ's fixed overhead volume variance?

Question

Quizplus · Accepted Answer

The budgeted or flexible budget amount for fixed overhead is $400,000 and the amount applied to production is $500,000 (25,000 machine hours x $10). $400,000 minus $250,000 equals the volume variance of $150,000 U.

The Management of XYZ Company Is Analyzing Fixed Manufacturing Overhead