Question

the overhead volume variance is budget overhead for coronado industry favorable and unfavorable overhead volume

Answer 1

Fixed overhead volume variance is the difference between fixed overhead applied to good units produced during a given accounting period and the total fixed overheads budgeted for the period. Fixed overhead volume variance occurs when the actual production volume differs from budgeted production. In this way it measures whether or not the fixed production resources have been efficiently utilized.

Fixed overhead volume variance is favorable when the applied fixed overhead exceeds the budgeted amount. This is because the units produced in such case are more than the quantity expected from current production capacity and this reflects efficient use of fixed resources. The standard fixed overhead applied to units exceeding the budgeted quantity is saved in the form of over-applied overhead. The result is lower actual unit costs and higher profitability than budgeted figures. An unfavorable fixed overhead volume variance occurs when the fixed overhead applied to good units produced falls short of the total budged fixed overhead for the period. This is because of inefficient use the fixed production capacity.