Question

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% of normal capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:Standard: 25,000 hours at $10 $250,000Actual:Variable factory overhead$202,500Fixed factory overhead 60,000What is the amount of the fixed factory overhead volume variance

Answer 1

Answer:

Fixed Factory Overhead Volume Variance = $10,000 Unfavorable

Explanation:

Provided information we have,

Fixed Overhead standard = $2 per labor hour

This is based on maximum output of 30,000 labor hours.

Since actual hours = 25,000

Standard overhead = 25,000 $\times$ $2 = $50,000

Actual Fixed Overhead = $60,000

Thus Fixed Factory Overhead Volume Variance = (Standard Overheads to be applied - Actual Overheads Applied)

= ($50,000 - $60,000)

= -$10,000

As we see the value is negative because actual overheads are more than the standard thus, it is unfavorable.

Fixed Factory Overhead Volume Variance = $10,000 Unfavorable