Colina Production Company Uses a Standard Costing System The Factory Overhead Rate Is Based on an Activity Level

Colina Production Company uses a standard costing system. The following information pertains to the current year. Direct labor hours is the driver used to assign overhead costs to products. $\begin{array}{ll}\text { Actual production } & 5,500 \text { units } \\\text { Actual factory overhead costs ( } \$ 16,500 \text { is fixed) } & \$ 40,125 \\\text { Actual direct labor costs }(11,250 \text { hours) } & \$ 131,625 \\\text { Standard direct labor for } 5,500 \text { units: } & \\\text { Standard hours allowed } & 11,000 \text { hours } \\\text { Labor rate } & \$ 12.00\end{array}$
The factory overhead rate is based on an activity level of 10,000 direct labor hours. Standard cost data for 5,000 units is as follows:
$\begin{array}{lr}\text { Variable factory overhead } & \$ 22,500 \\\text { Fixed factory overhead } & 13,500 \\\text { Total factory overhead } & \mathbf{\underline { 36 , 0 0 0 }}\end{array}$ What is the fixed overhead volume variance for Colina Production Company?

A) $3,600 (F)
B) $1,350 (F)
C) $4,125 (U)
D) $1,350 (U)

Correct Answer:

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