Question

Surfer sam company produced 4,000 units of product that required 2.5 standard hours per unit. the standard fixed overhead cost per unit is $0.80 per hour at 10,500 hours, which is 100% of normal capacity. determine the fixed factory overhead volume variance.

Answer 1

The fixed factory overhead volume variance is $400 (unfavorable)

solution

Fixed Overhead Volume Variance = Applied Fixed Overhead – Budgeted Fixed Overhead

Applied Fixed Overhead = 4,000 units ×2.5 hrs per unit×$0.80 = $8000

$Applied Fixed Overhead= 4,000 units ×2.5 hrs per unit× 0.80 = 8000$

and

Budgeted Fixed Overhead =10,500 hrs × $0.80 = $8400

$Budgeted Fixed Overhead =10,500 hrs × 0.80 = 8400$

Fixed Overhead Volume Variance = $8000- $8400 = $400 (unfavorable)

$Fixed Overhead Volume Variance = 8000- 8400 = 400 (unfavorable)$