Answer the following questions using the information below:
Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:

-What is the fixed overhead production-volume variance?
A)$4,000 unfavorable
B)$36,000 favorable
C)$40,000 unfavorable
D)$44,000 unfavorable

Question

Answer the following questions using the information below:
Gus Corporation manufactured 10,000 golf bags during April. The fixed overhead cost-allocation rate is $40.00 per machine-hour. The following fixed overhead data pertain to March:
 
-What is the fixed overhead production-volume variance?
A)$4,000 unfavorable 
B)$36,000 favorable 
C)$40,000 unfavorable 
D)$44,000 unfavorable

Quizplus · Accepted Answer

To calculate the fixed overhead production-volume variance, we need to find the difference between the budgeted fixed overhead (based on the predetermined fixed overhead rate) and the actual fixed overhead applied based on the actual machine hours used in April.

Budgeted fixed overhead = $40.00 per machine-hour x 9,000 machine-hours budgeted for April = $360,000

Actual fixed overhead applied = $40.00 per machine-hour x 8,500 machine-hours used in April = $340,000

Fixed overhead production-volume variance = Budgeted fixed overhead - Actual fixed overhead applied
= $360,000 - $340,000
= $20,000 unfavorable

Therefore, the best choice is C as it represents the fixed overhead production-volume variance.

Answer the Following Questions Using the Information Below