Nexus Industries uses a standard costing system to apply manufacturing costs to its production process. In May, Nexus anticipated producing units with fixed manufacturing overhead costs allocated at per direct labor hour with a standard of direct labor hours per unit. In May, actual production was units and actual fixed manufacturing overhead costs were . What was Nexus' fixed manufacturing overhead volume variance in May?

"Nexus industries uses a standard costing system to apply manufacturing costs to its production process. In May nexus anticipated 2700 units with fixed manufacturing overhead costs allocated at $8.40 per direct labor hour with a standard of 2.5 direct labor hours per unit. In May, actual production was 3400 units and actual fixed manufacturing overhead cost were $23000. What was nexus fixed manufacturing overhead volume variance in May?"

Solution:

Budgeted fixed overhead costs = Units * Direct labor cost * Standard Direct Labor hours per unit

= 2,700 units * $8.40 * 2.5

= 2,700 units * 21

= $56,700

Fixed manufacturing overhead volume variance = Actual fixed overhead cost - Budgeted fixed manufacturing overhead costs

When Actual fixed overhead = $23,000 , Budgeted fixed overhead costs = $56,700

Fixed manufacturing overhead volume variance = $23,000 - $56,700

= $33,700 (Favorable) .