The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead at 100% production capacity. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000 and actual variable overhead was $170,000. Actual production was 11,700 units. Compute the factory overhead volume variance.
A) $9,000F
B) $9,000U
C) $5,500F
D) $5,500U

Question

Quizplus · Accepted Answer

The factory overhead volume variance is calculated as the difference between the budgeted fixed overhead and the applied fixed overhead. The budgeted fixed overhead is $360,000. The applied fixed overhead is based on actual production: (11,700 units / 12,000 units) * $360,000 = $351,000. The variance is $360,000 - $351,000 = $9,000 unfavorable (U).

The St Augustine Corporation Originally Budgeted for $360,000 of Fixed Overhead