Answer:
1. The correct option is B
2. The correct option is D
Explanation:
1
The fixed factory overhead volume variance is computed as:
Fixed factory overhead volume variance = Standard fixed overhead rate per hour × (Standard hours for actual output - Budgeted Output )
where
Standard fixed overhead rate per hour is $0.80
Standard hours for actual output = 2,500 units × 3 hours per unit
Budgeted output is 10,000 hours
= $0.80 × [(2,500 × 3) - 10,000]
= $0.80 × (2,500)
= ($2,000)
It is unfavorable as it is negative.
2
The variable factory overhead controllable variance is computed as:
Variable factory overhead controllable variance = Actual hours × ( Standard rate per hour - Actual rate per hour)
where
Actual hours = 2,500 units × 3 hours per unit
Standard rate per hour is $2.00 per hour
Actual rate per hour = Total variable cost / Actual hours
= (2,500 × 3) × [ 2 - ( $18,000 / 7,500)]
= 7,500 × ( 2 - $2.4)
= 7,500 × ($0.4)
= ($3,000)
It is unfavorable as it is negative.
