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Bay Company had actual production of 220 units in the month of April. Budgeted standard fixed...

Bay Company had actual production of 220 units in the month of April. Budgeted standard fixed overhead costs were $20,000, based on normal capacity of 800 direct labor hours per month. The time standard was 4 direct labor hours per unit. The fixed overhead volume variance for April was

a.

$3,600 F
b.

$3,600 U
c.

$2,000 F
d.

$2,000 U
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Answer #1

Budgeted standard fixed overhead cost = $20000

Standard direct labor hours = 800

Standard direct labor hours per unit = 4

Budgeted standard units for the month of April =

Standard direct labor hours / Standard direct labor hours per unit

= 800 / 4 = 200 units

Fixed overhead application rate = Budgeted standard fixed overhead cost/Budgeted standard units

= $20000/200 = $100 per unit

Actual production = 220 units

Fixed overhead volume variance = (Actual units - Standard units) x Fixed overhead application rate

= (220 - 200) x $100

= 20 x $100 = $2000 Favorable

Answer is c. $2,000 F

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