Question

Budgeted overhead for Cinnabar Industries at normal capacity of 30,000 direct labor hours is $6 per hour variable and $4 per hour fixed. In May, $310,000 of overhead was incurred in working 31,500 hours when 32,000 standard hours were allowed. The overhead volume variance is Group of answer choices $10,000 favorable. $11,000 favorable. $5,000 favorable. $8,000 favorable.

Answer 1

Answer:

Manufacturing overhead volume variance= $5,000 favorable

Explanation:

Giving the following information:

Estimated overhead allocation rate= 4 + 6= $10 per direct labor hour

Actual number of hours= 31,500

Standard hours were allowed= 32,000

To calculate the overhead volume variance, we need to use the following formula:

Manufacturing overhead volume variance= (Estimated manufacturing overhead rate*standard allocation base) - (Estimated manufacturing overhead rate* Actual amount of allocation base)

Manufacturing overhead volume variance= (10*32,000) - (10*31,500)

Manufacturing overhead volume variance= $5,000 favorable