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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Business

Denise Banks

4 March, 16:47

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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Tyshawn Mckee · Answer 1

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.