Question

# Sanford Ltd. produces a product with the following standard cost card: Direct materials (20 kg) \$50.00...

Sanford Ltd. produces a product with the following standard cost card:

 Direct materials (20 kg) \$50.00 Direct labour (7 hours) 84.00 Variable overhead (7 hours) 21.00 Fixed overhead (7 hours) 33.38

The fixed overhead rate is based on a standard monthly volume of 16366 units.

The actual results for the month of July 20x5 are as follows:

 Direct materials purchased and used (325500 kg) \$620000 Direct labour (96688 hours) 1023000 Variable overhead 320000 Fixed overhead 574715 Units produced and sold 15218 units

What is Sanford’s fixed overhead volume variance for July 20x5 (note: a negative number represents an unfavourable variance and a positive number represents a favourable variance)?

Select one:

a. \$-28418

b. \$-38320

c. \$86895

d. \$38320

 Answer is b. \$ -38320 Explanation: Applied Fixed oh on actual output: Actual output 15218 Multiply: Fixed OH rate per unit 33.38 Applied Fixed oh on actual output: 507976.8 Budgeted Fixed Overheads Budgeted Output 16366 Multiply: Fixed OH rate per unit 33.38 Budgeted Fixed Overheads 546297.1 Fixed OH volume variance -38320.2

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