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A company uses a standard costing system. At the end of the current year, the company...

A company uses a standard costing system. At the end of the current year, the company provides the following overhead information.

Actual overhead incurred

   Variable

$86,000

   Fixed

$64,500

Budgeted fixed overhead

$65,000

Fixed overhead rate (per direct labor hour)

$         5

Standard hours allowed for actual production

12,000

Actual labor hours used

11,000

What amount is the volume variance?

.$5,000 favorable

b.$2,500 favorable

c.$2,500 unfavorable

d.$5,000 unfavorable

business   accounting   
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Answer #1

Volume variance = Applied overhead - Budgeted overhead

= 12000*5 - 65000

= $5000 unfavorable

Option d. is correct answer.

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