Expected volume of production 50,000 units Actual volume of production 47,500 units Budgeted fixed overhead costs(for 50,000 budgeted units) $400,000 Actual fixed overhead costs $415,000 Actual variable overhead costs $790,000 Budgeted variable overhead costs(for 50,000 budgeted units) $855,000 Assume the costminusallocation base for overhead costs is units of production. What is the production volume variance?

Volume Variance= $ 20,000 Unfavorable

Explanation:

The Volume Variance is the difference between actual production (AP) and budgeted production (BP) for a period multiplied by the standard fixed overhead rate (SR)

Volume Variance= (AP-BP) *SR = (47500- 50,000)* 400,000/50,000=

                          = 2,500 * 8=  $ 20,000 Unfavorable

Whenever actual production is less than the budgeted production the fixed overhead charged to production is less than the budgeted cost the volume variance is adverse.

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