Question

Budgeted production (in units) 1,200
Budgeted machine-hours or denominator activity 6,000
Actual production 1,500
Standard hours allowed for the actual output 7,500
Budgeted fixed manufacturing overhead $ 21,000
Actual fixed manufacturing overhead $ 22,000

What is the volume variance?

A. $1,000 U
B. $2,520 U
C.$5,250 F
D. $5,250 U

Answer 1

Answer:

C.$5,250 F

Explanation:

Volume variance is the variance between the actual quantity of a product sold or consumed during a period of time. Value of variance can be calculated by multiplying the volume variance with standard rate.

Standard Rate per unit = Budgeted Manufacturing Overhead / Budgeted production = $21,000 / 1200 = $175

Volume Variance = ( Actual  Quantity - Budgeted Quantity ) x Standard rate = ( 1500 - 1200 ) x $17.5 = $5,250

As the Actual Production of unit is higher than the budgeted, so the variance is favorable.