19 - The following data are given for Bahia Company: Round your final answer to

Question

19 - The following data are given for Bahia Company:

Round your final answer to the nearest dollar.

The fixed factory overhead volume variance is

a.$69,773 unfavorable

b.$69,773 favorable

c.$31,104 unfavorable

d.$31,104 favorable

Budgeted production (at 100% of normal capacity) 1,023 units Actual production   960 units Materials:     Standard price per pound $1.82     Standard pounds per completed unit 12     Actual pounds purchased and used in production 11,174     Actual price paid for materials $22,907 Labor:     Standard hourly labor rate $14.66 per hour     Standard hours allowed per completed unit 4.3     Actual labor hours worked 4,944     Actual total labor costs $75,396 Overhead:     Actual and budgeted fixed overhead $1,133,000     Standard variable overhead rate $26.00 per standard labor hour     Actual variable overhead costs $138,432 Overhead is applied on standard labor hours.

Explanation / Answer

Fixed factory overhead volume variance = Absorbed Fixed overheads - Budgeted Fixed Overheads

= Actual Output x FOAR* - Budgeted Output x FOAR*

* Fixed Overhead Absorption Rate per unit of output

Now, FOAR = Budgeted Fixed Overheads / Budgeted Hours

= 11,33,000 / (1,023 x 4.3)

= 257.56 per hour

Therefore,

Fixed factory overhead volume variance = (960 x 4.3 x 257.56) - (1,023 x 4.3 x 257.56)

= -69,773 or 69,773 Unfavorable

Since actual production is less than the budgeted production, therefore fixed factory overhead volume variance will be unfavorable.

Hence, the correct answer is option a.$69,773 unfavorable

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