Managerial Accounting Quiz: Fixed Overhead Variances
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Fixed Overhead VariancesQuestion 1 of 6

Coastal Manufacturing's fixed overhead standards are: Standard fixed overhead rate per machine hour: $12, Normal capacity: 8,000 machine hours per month, Budgeted fixed overhead: $96,000 per month. In June, actual machine hours were 7,400, actual production required 7,600 standard machine hours, and actual fixed overhead costs were $94,500.

What are the fixed overhead budget and volume variances for June?

Budget: $1,500 unfavorable; Volume: $2,400 favorable
Budget: $1,500 favorable; Volume: $7,200 unfavorable
Budget: $3,000 unfavorable; Volume: $4,800 unfavorable
Budget: $1,500 favorable; Volume: $4,800 unfavorable
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Managerial Accounting Quiz

Managerial Accounting Quiz: Fixed Overhead Variances

Practice Fixed Overhead Variances in Managerial Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Fixed Overhead Variances, giving you a quick way to practice the rules, question types, and explanations that matter most for Managerial Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Coastal Manufacturing's fixed overhead standards are: Standard fixed overhead rate per machine hour: $12, Normal capacity: 8,000 machine hours per month, Budgeted fixed overhead: $96,000 per month. In June, actual machine hours were 7,400, actual production required 7,600 standard machine hours, and actual fixed overhead costs were $94,500.

What are the fixed overhead budget and volume variances for June?

  1. Budget: $1,500 unfavorable; Volume: $2,400 favorable
  2. Budget: $1,500 favorable; Volume: $7,200 unfavorable
  3. Budget: $3,000 unfavorable; Volume: $4,800 unfavorable
  4. Budget: $1,500 favorable; Volume: $4,800 unfavorable (correct answer)
Explanation: Fixed overhead variance analysis splits the total variance into two components: budget variance (comparing actual costs to budgeted costs) and volume variance (measuring the impact of operating at a capacity level different from normal). To solve this, you need two calculations. The budget variance compares actual fixed overhead to budgeted fixed overhead: Budget Variance=Actual Fixed OH−Budgeted Fixed OH=$94,500−$96,000=−$1,500\text{Budget Variance} = \text{Actual Fixed OH} - \text{Budgeted Fixed OH} = \$94,500 - \$96,000 = -\$1,500 (favorable, since actual was less than budgeted). The volume variance measures the cost impact of operating below or above normal capacity using standard hours for actual production: Volume Variance=(Standard Hours for Actual Production−Normal Capacity)×Standard Rate=(7,600−8,000)×$12=−400×$12=−$4,800\text{Volume Variance} = (\text{Standard Hours for Actual Production} - \text{Normal Capacity}) \times \text{Standard Rate} = (7,600 - 8,000) \times \$12 = -400 \times \$12 = -\$4,800 (unfavorable, since production required fewer standard hours than normal capacity). Choice A incorrectly shows the budget variance as unfavorable and miscalculates the volume variance. Choice B makes the volume variance calculation error by using actual machine hours (7,400) instead of standard hours for actual production (7,600). Choice C appears to double-count or misapply the variance calculations entirely. Study tip: Remember that volume variance always uses standard hours for actual production (not actual machine hours used), and fixed overhead budget variance is simply actual minus budgeted costs. Volume variances are unfavorable when operating below normal capacity because you're spreading fixed costs over fewer units than planned.

Question 2

Meridian Corp uses standard costing with the following fixed overhead information: Budgeted fixed overhead costs: $180,000, Normal production capacity: 15,000 units, Actual production: 14,200 units, Actual fixed overhead costs: $185,000.

If the total fixed overhead variance is $14,600 unfavorable, what is the fixed overhead volume variance?

  1. $9,600 unfavorable (correct answer)
  2. $5,000 favorable
  3. $9,600 favorable
  4. $19,600 unfavorable
Explanation: Total fixed overhead variance = Budget variance + Volume variance. Budget variance = $185,000 - $180,000 = $5,000 unfavorable. Since total variance is $14,600 unfavorable and budget variance is $5,000 unfavorable, volume variance = $14,600 - $5,000 = $9,600 unfavorable. This makes sense as actual production (14,200) was below normal capacity (15,000). Choice B shows favorable incorrectly. Choice C has wrong sign. Choice D adds instead of subtracting variances.

Question 3

Harmony Corporation has the following fixed overhead data for September: Budgeted fixed overhead: $75,000, Standard fixed overhead rate: $5 per unit, Normal capacity: 15,000 units, Actual fixed overhead: $77,500, Actual production: 14,500 units.

Which statement best describes Harmony's fixed overhead variances for September?

  1. Budget variance is favorable because actual costs exceeded applied overhead by $5,000
  2. Volume variance is unfavorable because production fell short of normal capacity by 500 units (correct answer)
  3. Both variances are unfavorable, with budget variance larger than volume variance in dollar terms
  4. Total fixed overhead variance equals zero because budget and volume variances offset each other
Explanation: Budget variance = $77,500 - $75,000 = $2,500 unfavorable. Volume variance = (15,000 - 14,500) × $5 = $2,500 unfavorable. Statement B correctly identifies the volume variance as unfavorable due to underproduction. Choice A misinterprets budget variance. Choice C is wrong as both variances are equal in dollar terms. Choice D incorrectly suggests variances offset when both are unfavorable.

Question 4

Zenith Company's cost accounting system shows: Fixed overhead applied to production: $156,000, Fixed overhead budget variance: $3,000 favorable, Fixed overhead volume variance: $6,000 unfavorable, Standard fixed overhead rate: $12 per direct labor hour.

What was Zenith's normal capacity in direct labor hours?

  1. 12,500 hours
  2. 13,000 hours
  3. 13,500 hours (correct answer)
  4. 14,000 hours
Explanation: Applied fixed overhead = Standard hours allowed × Standard rate, so Standard hours allowed = $156,000 ÷ $12 = 13,000 hours. Volume variance = (Normal capacity - Standard hours allowed) × Standard rate. $6,000 unfavorable = (Normal capacity - 13,000) × $12. Solving: Normal capacity = (6,000 ÷ 12) + 13,000 = 500 + 13,000 = 13,500 hours. Choices A and B underestimate capacity. Choice D overestimates the capacity calculation.

Question 5

Phoenix Industries has established the following standards for fixed overhead: Standard rate per direct labor hour: $8.00, Normal capacity: 12,500 direct labor hours per month, Standard direct labor hours per unit: 2.5 hours. During April, the company produced 4,800 units and incurred $95,000 in fixed overhead costs. Actual direct labor hours worked were 11,800.

What is the fixed overhead volume variance for April?

  1. $5,600 unfavorable
  2. $4,000 unfavorable (correct answer)
  3. $1,600 unfavorable
  4. $6,000 favorable
Explanation: Volume variance = (Normal capacity hours - Standard hours allowed for actual production) × Standard rate. Normal capacity = 12,500 hours. Standard hours for actual production = 4,800 units × 2.5 hours = 12,000 hours. Volume variance = (12,500 - 12,000) × $8 = 500 hours × $8 = $4,000 unfavorable. Choice A incorrectly uses actual hours worked. Choice C uses wrong hour calculation. Choice D incorrectly shows favorable when capacity exceeded standard hours allowed.

Question 6

Omega Industries provided the following fixed overhead information: Budgeted fixed overhead costs: $240,000, Normal capacity: 8,000 direct labor hours, Actual direct labor hours worked: 7,500, Standard direct labor hours allowed for actual production: 7,800, Fixed overhead applied to production: $234,000.

Based on this information, what can be determined about Omega's fixed overhead variances?

  1. Volume variance is favorable because standard hours allowed exceeded actual hours worked
  2. Budget variance is $6,000 favorable and volume variance is $6,000 unfavorable
  3. Both budget and volume variances are unfavorable based on the production shortfall
  4. Volume variance is $6,000 unfavorable and total variance cannot be determined without actual costs (correct answer)
Explanation: When analyzing fixed overhead variances, you need to understand that there are two components: the budget variance (difference between budgeted and actual fixed overhead) and the volume variance (difference between normal capacity and standard hours allowed, valued at the standard rate). First, calculate the standard fixed overhead rate: $240,0008,000 hours=$30 per hour\frac{\$240,000}{8,000 \text{ hours}} = \$30 \text{ per hour} The volume variance compares normal capacity (8,000 hours) to standard hours allowed for actual production (7,800 hours): (8,000−7,800)×$30=200×$30=$6,000 unfavorable(8,000 - 7,800) \times \$30 = 200 \times \$30 = \$6,000 \text{ unfavorable} This is unfavorable because the company operated below normal capacity. You can verify this calculation using the applied overhead: 7,800×$30=$234,0007,800 \times \$30 = \$234,000, which matches the given applied amount. However, to calculate the budget variance, you need the actual fixed overhead costs incurred, which aren't provided in the problem. Choice A is wrong because volume variance depends on standard hours allowed versus normal capacity, not actual hours worked. Choice B incorrectly assumes actual costs equal budgeted costs to derive a $6,000 favorable budget variance, but this information isn't given. Choice C is incorrect because while the volume variance is unfavorable, we cannot determine the budget variance direction without knowing actual costs. Choice D correctly identifies the $6,000 unfavorable volume variance and acknowledges that total variance cannot be determined without actual fixed overhead costs. Study tip: Always identify what information is missing before attempting variance calculations. Fixed overhead budget variance specifically requires actual fixed overhead costs incurred.