US CMA Part 1 · Chapter 3 · Question 13 of 30
Budgeted fixed manufacturing overhead is $150,000, based on a denominator level of 12,000 direct labor hours. Standard hours allowed for actual output were 12,500, and actual hours worked were 12,400. What is the production volume variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $6,250 favorable
Explanation
Fixed overhead rate = $150,000 / 12,000 = $12.50 per hour. Applied fixed overhead = 12,500 standard hours x $12.50 = $156,250. Production volume variance = applied - budgeted = $156,250 - $150,000 = $6,250 favorable, because output exceeded the denominator level. Actual hours are not used.
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