Stiller Corporation incurred fixed manufacturing costs of $24,000 during 2015. Other information for 2015 includes:
The budgeted denominator level is 2,000 units.
Units produced total 1,500 units.
Units sold total 1,200 units.
Beginning inventory was zero.
The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold.
-The production-volume variance is ________.
A) $8,000
B) $6,000
C) $9,600
D) 0

Question

Quizplus · Accepted Answer

The production-volume variance is calculated as (Actual production - Budgeted production) x Fixed manufacturing cost rate.
In this case, the budgeted production is 2,000 units and the actual production is 1,500 units, so the production-volume variance is (1,500 - 2,000) x Fixed manufacturing cost rate. 
The fixed manufacturing cost rate is calculated as Fixed manufacturing costs / Budgeted denominator level = $24,000 / 2,000 units = $12 per unit.
Thus, the production-volume variance is (1,500 - 2,000) x $12 = -$6,000.
Note that it is negative because actual production is less than budgeted production.

Stiller Corporation Incurred Fixed Manufacturing Costs of $24,000 During 2015