The St. Augustine Corporation originally budgeted for $360,000 of fixed overhead. Production was budgeted to be 12,000 units. The standard hours for production were 5 hours per unit. The variable overhead rate was $3 per hour. Actual fixed overhead was $360,000 and actual variable overhead was $170,000. Actual production was 11,700 units.
Compute the factory overhead volume variance.
Answer
A.$9,000F
B.$9,000U
C.$5,500F
D.$5,500U
5500 f
To compute the factory overhead volume variance, we need to compare the budgeted fixed overhead with the actual fixed overhead and take into account the difference in the production volume.
First, let's find the standard hours for the actual production:
Standard hours per unit = 5 hours per unit
Actual production = 11,700 units
Standard hours for actual production = Standard hours per unit * Actual production
Standard hours for actual production = 5 hours/unit * 11,700 units
Standard hours for actual production = 58,500 hours
Next, let's calculate the budgeted fixed overhead per standard hour:
Budgeted fixed overhead = $360,000
Standard hours for production = 12,000 units * 5 hours/unit = 60,000 hours
Budgeted fixed overhead per standard hour = Budgeted fixed overhead / Standard hours for production
Budgeted fixed overhead per standard hour = $360,000 / 60,000 hours
Budgeted fixed overhead per standard hour = $6 per hour
Now, let's calculate the standard fixed overhead based on the actual production volume:
Standard fixed overhead = Budgeted fixed overhead per standard hour * Standard hours for actual production
Standard fixed overhead = $6/hour * 58,500 hours
Standard fixed overhead = $351,000
Finally, let's calculate the factory overhead volume variance:
Factory overhead volume variance = Actual fixed overhead - Standard fixed overhead
Factory overhead volume variance = $360,000 - $351,000
Factory overhead volume variance = $9,000U
Therefore, the factory overhead volume variance is $9,000U, which stands for $9,000 unfavorable variance. So, the correct answer is option B.