Question

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% of normal capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows: Actual: Variable factory overhead $360,000 Fixed factory overhead 104,000 Standard hours allowed for units produced: 60,000 hours The fixed factory overhead volume variance is

Answer 1

$26,000 adverse variance

Step-by-step explanation:

Fixed Overheads Volume Variance = Budgeted Overheads at Actual Output - Budgeted Fixed Overheads

= $1.30 x 60,000 hours - $1.30 x 80,000

= $78,000 - $104,000

= $26,000 adverse variance

The fixed factory overhead volume variance is $26,000 adverse variance