[mrkalebfelts]

Ok here's the problem.

Pratt, Inc. uses a standard costing system and develops its overhead rates from the current annual budget. The budget is based on an expected annual output of 100,000 units requiring 500,000 direct labor hours. Annual budgeted overhead costs total $437,500, of which $187,500 is fixed overhead. A total of 104,000 units using 540,000 direct labor hours were produced during the year. Actual variable overhead costs for the year were $260,000, and actual fixed overhead costs were $200,000.

I have to find the fixed overhead volume variance. The fixed spending variance was the easy part, which is 12500. I've tried everything with volume variance, but honestly don't even really know where to start. I was thinking taking the 437500 overhead and dividing it by 500,000 DLH and then multiplying that by actual DLH of 540,000 but that comes up with 35,000 unfavorable, which is wrong. Any help would be appreciated, and thanks in advance.

[mrkalebfelts]

Ok, well I figured it out. The answer is 7500 favorable. But why would it be favorable? That's partly what is confusing me.