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8 August, 21:00

Expected volume of production 50,000 units Actual volume of production 47,500 units Budgeted fixed overhead costs (for 50,000 budgeted units) $400,000 Actual fixed overhead costs $415,000 Actual variable overhead costs $790,000 Budgeted variable overhead costs (for 50,000 budgeted units) $855,000 Assume the costminusallocation base for overhead costs is units of production. What is the production volume variance?

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  1. 8 August, 21:21
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    Volume Variance = $ 20,000 Unfavorable

    Explanation:

    The Volume Variance is the difference between actual production (AP) and budgeted production (BP) for a period multiplied by the standard fixed overhead rate (SR)

    Volume Variance = (AP-BP) * SR = (47500 - 50,000) * 400,000/50,000=

    = 2,500 * 8 = $ 20,000 Unfavorable

    Whenever actual production is less than the budgeted production the fixed overhead charged to production is less than the budgeted cost the volume variance is adverse.
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