Hamilton Pty Ltd uses a standard costing system for product costing.The company uses direct labour hours as the cost driver to apply overhead costs.The following amounts were budgeted for the year:
The following were the actual results:
Calculate the fixed overhead volume variance.

A) $24 000 favourable
B) $24 000 unfavourable
C) $34 000 favourable
D) $10 000 unfavourable

Question

Hamilton Pty Ltd uses a standard costing system for product costing.The company uses direct labour hours as the cost driver to apply overhead costs.The following amounts were budgeted for the year:
The following were the actual results:
Calculate the fixed overhead volume variance.

A) $24 000 favourable 
B) $24 000 unfavourable 
C) $34 000 favourable 
D) $10 000 unfavourable

Quizplus · Accepted Answer

Fixed Overhead Volume Variance = Budgeted Fixed Overhead - Applied Fixed Overhead

Budgeted Fixed Overhead = $480,000
Applied Fixed Overhead = $528,000 (actual production hours = 22,000 x standard rate of $24)

Fixed Overhead Volume Variance = $480,000 - $528,000 = $48,000 unfavorable

Therefore, the correct answer is B, $24,000 unfavorable (since it is half of $48,000).

Hamilton Pty Ltd Uses a Standard Costing System for Product