The following budget data pertain to the Machining Department of Yolkenverst Co.:

Maximum capacity 60,000unitsMachine hours per unit 2.50 Variable factory overhead$3.60per machine hourFixed factory overhead$433,500

The company prepared the budget at 85% of the maximum capacity level. The department uses machine hours as the basis for applying standard factory overhead costs to production.
During the year the Machining Department produced 50,000 units, consuming 127,500 machine hours and incurring $433,500 of fixed overhead. For the current year the department has a fixed overhead production volume variance, rounded to the nearest whole dollar, of:

$8,500 unfavorable



1. Denominator volume level (in units) = 60,000 units × 0.85 = 51,000 units.

2. Standard fixed overhead rate/unit = $433,500 (given)/51,000 units (see (1) above) = $8.50/unit.

3. Fixed overhead production volume variance = standard fixed overhead rate/unit × (actual volume ? denominator volume) = $8.50/unit × (50,000 ? 51,000) units = $8,500U (the variance is unfavorable (U) because actual volume < volume used to establish the fixed overhead application rate)