Factory Overhead Cost Variances The following data relate to factory overhead co
ID: 2438829 • Letter: F
Question
Factory Overhead Cost Variances
The following data relate to factory overhead cost for the production of 4,000 computers:
If productive capacity of 100% was 6,000 hours and the factory overhead cost budgeted at the level of 4,000 standard hours was $150,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $5 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Actual: Variable factory overhead $116,400 Fixed factory overhead 30,000 Standard: 4,000 hrs. at $35 140,000Explanation / Answer
Answer:
Variance
Amount
Favorable/Unfavorable
Controllable variance
3600
Favorable
Volume variance
10,000
Unfavorable
Total factory overhead cost variance:
6,400
Unfavorable
Working Notes for the above answer is as under
1
Variable factory overhead Controllable Variance
=116400-4000*30
= 116400-120,000
=$3600 Favorable
2
fixed factory overhead volume variance
= 30,000-4000*5
= 30,000-20,000
= $10,000 Unfavorable
Total factory overhead cost variance
=(116400+30,000)-(4000*35)
= $146400-140,000
=$6400 Unfavorable
Variance
Amount
Favorable/Unfavorable
Controllable variance
3600
Favorable
Volume variance
10,000
Unfavorable
Total factory overhead cost variance:
6,400
Unfavorable
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