Question

The following data is given for the Bahia Company:

Budgeted production (at 100% of normal capacity)	1,031 units
Actual production	963 units
Materials:
Standard price per pound	$1.85
Standard pounds per completed unit	11
Actual pounds purchased and used in production	10,275
Actual price paid for materials	$21,064
Labor:
Standard hourly labor rate	$14.08 per hour
Standard hours allowed per completed unit	4.2
Actual labor hours worked	4,959.45
Actual total labor costs	$75,632
Overhead:
Actual and budgeted fixed overhead	$1,080,000
Standard variable overhead rate	$28.00 per standard labor hour
Actual variable overhead costs	$138,865
Overhead is applied on standard labor hours.

Round your final answer to the nearest dollar. Do not round interim calculations.

The fixed factory overhead volume variance is

a.$71,232 unfavorable

b.$71,232 favorable

c.$25,616 unfavorable

d.$25,616 favorable

Answer 1

Fixed Factory overhead volume variance = budgeted fixed overhead-absorbed overhead

absorption rate = actual & budgeted fixed overhead/Budgeted production

absorption rate = 1080000/1031 = 1047.527

Fixed factory overhead volume variance = 1080000-(963*1047.527)

fixed factory overhead volume variance = 1080000-1008768

Fixed factory overhead volume variance = 71232 Favorable

Option "b" IS Correct

Give a thumbs up if it is helpful

please let me know if any doubt