Question

The following information is available from the Terry Company:

Actual total factory overhead cost incurred	$	25,000
Actual fixed overhead cost incurred	$	10,400
Budgeted fixed overhead expenses	$	11,000
Actual direct labor hours (DLH) worked		4,400
Standard DLHs for this period’s production (output)		4,000
Standard variable overhead rate per DLH	$	3.00
Standard fixed overhead rate per DLH	$	2.50

What is the fixed overhead production volume variance for Terry Company for the period, to the nearest whole dollar?

Multiple Choice

$1,200 unfavorable.

$1,400 favorable.

$1,400 unfavorable.

$600 favorable.

$1,000 unfavorable.

Answer 1

• All working forms part of the answer
• Available data has been used below:

Fixed Overhead applied
Fixed OH per DL hr	$                   2.50	[given]
Standard DL hours	4,000	[given]
Fixed Overhead applied	$         10,000.00	[4000 x 2.5]
Volume Variance
Total Fixed Overhead applied	$         10,000.00	[Calculated above]
Total Budgeted Fixed OH	$         11,000.00	[Given]
Fixed Overhead volume Variance [11000 – 10000]	$           1,000.00	Unfavourable

• Correct ANswer = Option #5: $ 1,000 Unfavourable