Reference no: EM133011307

Question - The Ogden plant makes Beanie Babies, which are small stuffed toys in a variety of animal shapes. The toys are so popular that they have become collectors' items. The plant develops a flexible budget and uses predetermined overhead rates to assign overhead costs to the different Beanie Babies produced. Overhead costs are assigned using direct labor hours. Fixed overhead is budgeted at $2.3 million for the next year and variable overhead is predicted to be $3.5 per direct labor hour.

The plant was designed two years ago to accommodate 180 production employees (direct labor), each working 2,000 hours per year. However, the expected volume for next year will be greater than the normal volume because of the high demand for Beanie Babies. Specifically, 240 production workers are projected for next year, and each worker is expected to work 2,200 hours per year. At the end of the year, based on the actual sales volume of Beanie Babies produced, the standard volume was 480,000 direct labor hours. Calculate the fixed cost production volume variance for the year assuming that expected volume was used in setting the overhead rate. Round all numbers calculated to two decimal places in the calculation.