Bargain Boys Company, which applies overhead to production on the basis of machine hours, reported the following data for the period just ended: Actual units produced: 14,800
Actual fixed overhead incurred: $791,000
Standard fixed overhead rate: $13 per hour
Budgeted fixed overhead: $780,000
Planned level of machine-hour activity: 60,000
If Bargain Boys estimates four hours to manufacture a completed unit, the fixed-overhead volume variance would be:

Question

Quizplus · Accepted Answer

Fixed-overhead volume variance = (Actual machine-hours - Budgeted machine-hours) x Standard fixed overhead rate

Actual machine-hours = Actual units produced x Standard hours per unit
Actual machine-hours = 14,800 units x 4 hours per unit = 59,200 hours

Budgeted machine-hours = Planned level of machine-hour activity
Budgeted machine-hours = 60,000 hours

Fixed-overhead volume variance = (59,200 - 60,000) x $13 = $10,400 unfavorable.

Bargain Boys Company, Which Applies Overhead to Production on the Basis