Question

Duncanville, Inc., has the following overhead standards:

Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour
The standards were based on a planned activity of 20,000 machine hours when 5,000 units were scheduled for production. Actual data follow.
Variable overhead incurred: $167,750
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100
Duncanville's fixed-overhead volume variance is:
A. $4,000 favorable.
B. $4,000 unfavorable.
C. $10,000 favorable.
D. $10,000 unfavorable.
E. not listed above.

Answer 1

The fixed-overhead volume variance is a measure of the difference between the actual number of machine hours used and the number of machine hours that should have been used based on the standard rate.

Step-by-step explanation:

The fixed-overhead volume variance is a measure of the difference between the actual number of machine hours used and the number of machine hours that should have been used based on the standard rate. To calculate the fixed-overhead volume variance, we need to find the standard hours allowed for production and subtract the actual hours used, and then multiply the result by the standard rate. In this case:

Standard hours allowed = Planned activity × Fixed overhead standard per hour

Actual hours used = Machine hours worked

Standard rate = Fixed overhead standard per hour

So, the fixed-overhead volume variance is:

(Planned activity × Fixed overhead standard per hour) - Machine hours worked × Fixed overhead standard per hour