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Benson Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were:

Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000
Benson's fixed-overhead volume variance is:
A. $10,000 favorable.
B. $15,000 favorable.
C. $15,000 unfavorable.
D. $20,000 favorable.
E. $20,000 unfavorable.

User Curpa
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1 Answer

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Final answer:

The student inquired about the fixed-overhead volume variance for Benson Company. Based on the provided data and standard costing methods, the variance is $35,000 unfavorable, which doesn't match any of the given options.

Step-by-step explanation:

The student is asking about the fixed-overhead volume variance for Benson Company which can be calculated using the budgeted fixed overhead and the standard hours for the actual production. In this case, Benson Company budgeted $600,000 of fixed overhead based on 40,000 machine hours. With 10,000 units produced and a standard production time of 3.9 machine hours per unit, the standard hours for actual production would be 39,000 hours (10,000 units * 3.9 hours/unit). The fixed overhead rate is $15 per machine hour ($600,000/40,000 hours). The standard fixed overhead cost for the actual production is therefore 39,000 hours times $15 per hour, which equals $585,000. The actual fixed overhead is $620,000, so the variance is $620,000 - $585,000, which equals $35,000 unfavorable. However, since only options for $10,000, $15,000, and $20,000 variances are given, it appears there may be a mistake in the question as presented. Using the options provided, none precisely match the calculated variance of $35,000.

User Duy Anh
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