Answer the following questions using the information below:
Tunney Corporation incurred fixed manufacturing costs of $7,200 during 2011. Other information for 2011 includes:
The fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
-Under absorption costing, the production-volume variance is:
A)$450
B)$1,350
C)$1,800

Question

Answer the following questions using the information below:
Tunney Corporation incurred fixed manufacturing costs of $7,200 during 2011. Other information for 2011 includes:
  The fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
-Under absorption costing, the production-volume variance is:
A)$450 
B)$1,350 
C)$1,800

Quizplus · Accepted Answer

Under absorption costing, the production-volume variance is calculated as the difference between the budgeted fixed manufacturing overhead and the applied fixed manufacturing overhead based on actual production. If the budgeted fixed overhead is $1,800 and the actual production is less than the budgeted production, the variance would be $1,800.

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