Budgeted production (in units) 1,200

Budgeted machine-hours or denominator activity 6,000

Actual production 1,500

Standard hours allowed for the actual output 7,500

Budgeted fixed manufacturing overhead $ 21,000

Actual fixed manufacturing overhead $ 22,000

What is the volume variance?

A. $1,000 U

B. $2,520 U

C.$5,250 F

D. $5,250 U

C.$5,250 F

Explanation:

Volume variance is the variance between the actual quantity of a product sold or consumed during a period of time. Value of variance can be calculated by multiplying the volume variance with standard rate.

Standard Rate per unit = Budgeted Manufacturing Overhead / Budgeted production = $21,000 / 1200 = $175

Volume Variance = (Actual Quantity - Budgeted Quantity) x Standard rate = (1500 - 1200) x $17.5 = $5,250

As the Actual Production of unit is higher than the budgeted, so the variance is favorable.