Question

The following data are given for Bahia Company: Budgeted production (at 100% of normal capacity) 1,000 units Actual production 980 units Materials: Standard price per pound $2.00 Standard pounds per completed unit 12 Actual pounds purchased and used in production 11,800 Actual price paid for materials $23,000 Labor: Standard hourly labor rate $14 per hour Standard hours allowed per completed unit 4.5 Actual labor hours worked 4,560 Actual total labor costs $62,928 Overhead: Actual and budgeted fixed overhead $27,000 Standard variable overhead rate $3.50 per standard labor hour Actual variable overhead costs $15,500 Overhead is applied on standard labor hours. The fixed factory overhead volume variance is:__________
a. $65 favorable
b. $540 unfavorable
c. $540 favorable
d. $65 unfavorable

Answer 1

Answer:

Fixed overhead volume variance   $540   unfavorable

Explanation:

The fixed overhead volume variance is the difference between the budgeted and actual production volume multiplied by the standard fixed production overhead rate per unit.

Overhead absorption rate = Budgeted Fixed overhead/Budgeted units

                                            = 27,000/1000 =$27 per unit

                                                               Unit

Budgeted production                         1000

Actual production                               980

Volume variance                                  20

Standard fixed overhead cost           $27

Fixed overhead volume variance       $540   unfavorable