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
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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