Formidable Company Collected the Following Information Using the Two Variance Method, What Is the Volume Variance

question 25

Multiple Choice

Formidable Company collected the following information: $\begin{array}{ll}\text { Standard costs per unit: }\\\text { Variable overhead } & 4 \text { machine hours } @ \$ 6 \text { per machine hour } \\\text { Fixed overhead } & 4 \text { machine hours } @ \$ 10 \text { per machine hour }\\\\\text { Actual output } & 20,000 \text { units } \\\text { Denominator (normal capacity) output } & 21,000 \text { units } \\\text { Actual machine hours } & 79,000 \text { machine hours } \\\text { Actual variable overhead cost } & \$ 540,000 \\\text { Actual fixed overhead cost } & \$ 810,000\\\end{array}$ Using the two variance method, what is the volume variance?

• A)$6,000 (F)
• B)$40,000 (F)
• C)$40,000 (U)
• D)$6,000 (U)

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Definitions:

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.

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Neoclassical Economic Models

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Heuristics

Simple, efficient rules or methods that people often use to form judgments and make decisions, based on limited information.