exercise 21-21 (algo) volume variance lo p4

liu company produced 810 units. its overhead allocation base is dlh and its standard amount per allocation base is 8 dlh per unit. its standard overhead rate is $10 per dlh. the flexible overhead budget at an activity level of 810 units shows $32,500 in variable overhead costs and $36,500 in fixed overhead costs. compute the volume variance.
note: indicate the effect of the variance by selecting favorable, unfavorable, or no variance.

Question

exercise 21-21 (algo) volume variance lo p4

liu company produced 810 units. its overhead allocation base is dlh and its standard amount per allocation base is 8 dlh per unit. its standard overhead rate is $10 per dlh. the flexible overhead budget at an activity level of 810 units shows $32,500 in variable overhead costs and $36,500 in fixed overhead costs. compute the volume variance.
note: indicate the effect of the variance by selecting favorable, unfavorable, or no variance.

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "explain_then_answer", "quick" ], "needs_drawing": false, "concepts_used": [ "Overhead Volume Variance", "Fixed Overhead Allocation" ], "new_concepts": [], "current_concepts": [ "Overhead Volume Variance", "Fixed Overhead Allocation" ] } ## Calculate budgeted and applied fixed overhead $$ \begin{aligned} &\text{Budgeted Fixed Overhead} = \$36,500\ &\text{Standard DLH allowed} = 810 \text{ units} \times 8 \text{ DLH/unit} = 6,480 \text{ DLH}\ &\text{Standard Overhead Rate} = \$10 \text{ per DLH}\ &\text{Standard Variable Overhead Rate} = \frac{\$32,500}{810 \text{ units} \times 8 \text{ DLH/unit}} = \frac{\$32,500}{6,480 \text{ DLH}} \approx \$5.0154 \text{ per DLH}\ &\text{Standard Fixed Overhead Rate} = \$10 - \$5.0154 = \$4.9846 \text{ per DLH}\ &\text{Applied Fixed Overhead} = 6,480 \text{ DLH} \times \$4.9846 \text{ per DLH} = \$32,300 \end{aligned} $$ ## Compute volume variance $$ \begin{aligned} &\text{Volume Variance} = \text{Budgeted Fixed Overhead} - \text{Applied Fixed Overhead}\ &\text{Volume Variance} = \$36,500 - \$32,300 = \$4,200 \quad (\text{Unfavorable}) \end{aligned} $$ | Volume Variance | | | |---|---|---| | Budgeted fixed overhead | \$36,500 | | | Fixed overhead applied | \$32,300 | | | Volume variance | \$4,200 | Unfavorable | { "subject": "Business", "question_type": "Fill-in-the-blank", "knowledge_point": [ "Business", "Accounting", "Overhead Volume Variance" ] }

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QUESTION IMAGE

Question

Explanation:

Calculate budgeted and applied fixed overhead

Compute volume variance

Answer:

Volume Variance
Fixed overhead applied	\$32,300
Volume variance	\$4,200	Unfavorable