The Standard Factory Overhead Rate Is $7 ? What Is the Amount of the Fixed Factory Overhead

question 45

Multiple Choice

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours.The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows: $$\begin{array} { l l r } \text { Actual: } & \text { Variable factory overhead } & \$ 360,000 \\& \text { Fixed factory overhead } & 104,000 \\\text { Standard: } & 60,000 \text { hours at } \$ 7.50 & 450,000\end{array}$$ ? What is the amount of the fixed factory overhead volume variance?

• A) $26,000 unfavorable
• B) $12,000 favorable
• C) $26,000 favorable
• D) $12,000 unfavorable

---

Definitions:

Par Common Stock

The face value of a share of common stock as specified in the corporate charter, with no bearing on the market value.

Fair Market Price

The price at which an asset would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Preferred Stock

Preferred Stock represents a class of ownership in a corporation that has a higher claim on assets and earnings than common stock, often including fixed dividends.

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and a claim on part of the company's profits.