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The standard variable overhead cost rate for the Gordon Company is $ 12.25 per unit. Budgeted...

The standard variable overhead cost rate for the Gordon Company is $ 12.25 per unit. Budgeted fixed overhead cost is $54,000. The company budgeted 6,000 units for the current period and actually produced 3,700 finished units. What is the fixed overhead volume​ variance

Assume the allocation base for fixed overhead costs is the number of units expected to be produced.

A. $8,675 favorable

B. $20,700 unfavorable

C. $8,675 unfavorable

D. $20,700 favorable

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Answer #1

Fixed Overhead volume variance is diference between fixed OH applied to actual prouction and the amount applied for budgeted production.

Fixed OH volume variance = Standard cost ( Actual quantity-Budgeted quantity)

fixed OH per unit= Budgeted fixed overhead cost /Budgeted production

=$54,000/6000

=$9 per unit

Fixed OH Volume variance= $9 (3,700-6,000)

=$9*2,300

=$20,700 favorable (As the actual quantity is lower than budgeted the variance is favorable)

Answer D

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