Factory Overhead Cost Variance Report Tiger Equipment Inc., a manufacturer of co
ID: 2452941 • Letter: F
Question
Factory Overhead Cost Variance Report Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2014. The company expected to operate the department at 100% of normal capacity of 8,500 hours. Variable costs: Indirect factory wages $25,500 Power and light 15,725 Indirect materials 12,325 Total variable cost $53,550 Fixed costs: Supervisory salaries $15,440 Depreciation of plant and equipment 39,620 Insurance and property taxes 12,090 Total fixed cost 67,150 Total factory overhead cost $120,700 During May, the department operated at 9,000 standard hours, and the factory overhead costs incurred were indirect factory wages, $27,270; power and light, $16,350; indirect materials, $13,300; supervisory salaries, $15,440; depreciation of plant and equipment, $39,620; and insurance and property taxes, $12,090.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 9,000 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required.
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Variance Budget Actual Favorable Unfavorable Indirect factory wages $27,000 $27,270 $270.00 Power and light $16,650 $16,350 -$300.00 Indirect materials $13,050 $13,300 $250.00 Total variable cost $56,700.00 $56,920 Supervisory salaries $15,440 $15,440 Depreciation of plant & Machinery $39,620 $39,620 Insurance and property taxes $12,900 $12,900 Total fixed cost $67,960.00 $67,960 Total factory overhead cost $124,660.00 $124,880 Total controllable variances $520.00 -$300.00 Net controllable variance—unfavorable $220.00 volume variance : favrorable Idle hours at the standard rate for fixed factory Overhead—(8500 hrs. – 9000 hrs.) × $8.00 4000 Total factory overhead cost variance— favrorable $3,780.00 ;=67960/8500 '=8*(fixed overhead) Variable cost rate Multiply by 9000 Indirect factory wages '=25500/8500 $3.00 $27,000 Power and light '=15725/8500 $1.85 $16,650 Indirect materials '=12325/8500 $1.45 $13,050
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