Question

Greyson Company produced 8,300 units of their product that required 4.25 standard hours per unit. The standard fixed overhead cost per unit is $1.80 per hour at 27,000 hours, which is 100% of normal capacity. The Fixed Factory Overhead Volume Variance is equal to: a) $14,895 Unfavorable b) -$14,895 Favorable c) $8,275 Unfavorable d) -$8,275 Favorable

Answer 1

Fixed Factory Overhead Volume Variance is the difference between standard and absorbed fixed overheads.

Actual units produced = 8300 units

Time taken in hours per unit = 4.25 hours

Therefore actual total hours required for production = 8300 x 4.25 = 35,275 hours

Standard hours required for production at normal capacity (given) = 27,000 hours

Standard fixed overhead cost per unit (given) = $ 1.80 per hour

Fixed Factory Overhead Volume Variance = Absorbed/Actual fixed overheads - budgeted fixed overheads

= (35,275 x 1.80) - (27,000 x 1.80)

= $ 14,895 Unfavorable