Asked by Martin Thompson on Jun 09, 2024
Verified
The fixed factory overhead volume variance is
A) $2,000 favorable
B) $2,000 unfavorable
C) $2,500 unfavorable
D) $0
Fixed Factory Overhead Volume Variance
A measure used in cost accounting to determine the difference between the budgeted and actual volume of production, affecting fixed overhead costs.
Standard Costs
Standard costs are the predetermined costs associated with manufacturing a product or delivering a service, used as benchmarks to measure performance.
Actual Costs
The real expenses incurred in the production or acquisition of goods and services.
- Comprehend the techniques for determining the overall variances in factory overhead costs and their constituent elements.
Verified Answer
Fixed factory overhead volume variance = (Budgeted fixed overhead cost - Actual fixed overhead cost)
In this case, the budgeted fixed overhead cost is based on a standard rate of $0.80 per hour for 10,000 hours, which is $8,000. The actual fixed overhead cost is given as $8,000. Therefore, the calculation is:
Fixed factory overhead volume variance = ($8,000 - $8,000) = $0
Since the result is $0, there is no volume variance for fixed factory overhead. Option (D) is incorrect.
Option (A) suggests that there is a favorable variance, meaning that the actual fixed overhead cost is lower than the budgeted amount. However, the calculation shows that the actual cost is equal to the budgeted amount, so there is no favorable or unfavorable variance.
Option (C) suggests that there is an unfavorable variance, meaning that the actual fixed overhead cost is higher than the budgeted amount. However, as mentioned earlier, the actual cost is equal to the budgeted amount, so there is no unfavorable variance.
Therefore, the correct answer is (B) - there is no fixed factory overhead volume variance.
Learning Objectives
- Comprehend the techniques for determining the overall variances in factory overhead costs and their constituent elements.
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