Question

Gina Production Company uses a standard costing system. The following information pertains to the current year: ​

Actual overhead costs ($16,500 is fixed) $40,125
Actual direct labor costs (11,250 hours) $131,625
Standard direct labor for 5,500 units: ​
Standard hours allowed 11,000 hours
Labor rate $12.00 ​ ​
The overhead rate is based on an activity level of 10,000 hours. Standard cost data for 5,000 units is as follows: ​

Variable overhead $22,500
Fixed overhead 13,500
Total overhead $36,000 ​
What is the fixed overhead volume variance for Gina Production Company?

a .$1,350 Fb.​ $3,600 Fc. $4,125 Ud. $1,350 U

Answer 1

Answer:

Fixed overhead volume variance

= (Standard hours - Budgeted hours) x Standard fixed overhead rate

= (11,000 - 10,000) x $1.35

= $1,350(F)

The correct answer is A

Standard fixed overhead rate

= Budgeted overhead

  Budgeted direct labour hours

= $13,500

   10,000 hours

= $1.35 per direct labour hour

Explanation:

Fixed overhead volume variance is the difference between standard hours and budgeted hours multiplied by standard fixed overhead application rate. Standard fixed overhead application rate is the ratio of budgeted overhead to budgeted direct labour hours.