The following information for the past year is available from Thinnews Co., a company that uses machine hours to apply standard factory overhead cost to outputs:

Actual total factory overhead cost incurred$24,000 Actual fixed overhead cost incurred$10,000 Budgeted fixed overhead cost$11,000 Actual machine hours 5,000 Standard machine hours allowed for the units manufactured 4,800 Denominator volume—machine hours 5,500 Standard variable overhead rate per machine hour$3.00

Under a three-variance breakdown (decomposition) of the total factory overhead variance, the fixed factory overhead production-volume variance (to the nearest whole dollar) is:

$1,400 unfavorable

1. The production volume variance is the same for a two-variance breakdown, a three-variance breakdown, and a four-variance breakdown of the total overhead variance.

2. Factory overhead production volume variance = Standard fixed overhead rate per machine hour × (denominator volume, in machine hours ? standard hours allowed for this period's output) = SP × (denominator activity hours - SQ).

3. Standard fixed overhead rate per machine hour = SP = $11,000 (given) / 5,500 machine hours (given) = $2.00 per machine hour.

4. Denominator activity volume (in machine hours) = 5,500 (given).

5. Standard machine hours allowed for this period's output = SQ = 4,800 (given).

6. Therefore, fixed overhead production volume variance = $2.00 per machine hour × (5,500 ? 4,800) machine hours = $1,400U (to nearest whole dollar).

(Note: the variance here is unfavorable (U) because the standard machine hours allowed for this period's output < the "denominator volume," i.e., the number of machine hours used to establish the standard fixed overhead application rate per machine hour).