Tannin Products Inc. prepared the following factory overhead cost budget for the
ID: 2519896 • Letter: T
Question
Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 13,000 hours for production Variable overhead costs: Indirect factory labor Power and light Indirect materials $36,400 9,490 15,600 Total variable overhead cost 61,490 Fixed overhead costs: Supervisory salaries Depreciation of plant and equipment Insurance and property taxes $54,260 14,280 26,660 Total fixed overhead cost 95,200 Total factory overhead cost $156,690 Tannin has available 17,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 12,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Actual variable factory overhead costs: Indirect factory labor Power and light Indirect materials $32,760 8,600 15,100 $56,460 Total variable costExplanation / Answer
Factory overhead cost for 12000 hours
Budgeted
Actual
Favourable variance
Unfavourable variance
Indirect factory labour (36400 x 12000 /13000)
33,600.00
32,760.00
840.00
Power and light (9490 x 12000/13000)
8,760.00
8,600.00
160.00
Indirect materials (15600 x 12000/13000)
14,400.00
15,100.00
(700.00)
Total variable overhead cost
56,760.00
56,460.00
Fixed overhead costs:
Supervisory salaries
54,260.00
54,260.00
Depreciation of plant and equipment
14,280.00
14,280.00
Insurance and property taxes
26,660.00
26,660.00
Total fixed overhead costs
95,200.00
95,200.00
Total factory overhead costs
151,960.00
151,660.00
Total controllable variances
1,000.00
(700.00)
Net controllable variance -Favourable (1000 -700)
300.00
Idle hours at the standard rate for fixed factory overhead (17000 - 12000)
5000 hours
Total factory overhead cost variance unfavourable
(700.00)
Factory overhead cost for 12000 hours
Budgeted
Actual
Favourable variance
Unfavourable variance
Indirect factory labour (36400 x 12000 /13000)
33,600.00
32,760.00
840.00
Power and light (9490 x 12000/13000)
8,760.00
8,600.00
160.00
Indirect materials (15600 x 12000/13000)
14,400.00
15,100.00
(700.00)
Total variable overhead cost
56,760.00
56,460.00
Fixed overhead costs:
Supervisory salaries
54,260.00
54,260.00
Depreciation of plant and equipment
14,280.00
14,280.00
Insurance and property taxes
26,660.00
26,660.00
Total fixed overhead costs
95,200.00
95,200.00
Total factory overhead costs
151,960.00
151,660.00
Total controllable variances
1,000.00
(700.00)
Net controllable variance -Favourable (1000 -700)
300.00
Idle hours at the standard rate for fixed factory overhead (17000 - 12000)
5000 hours
Total factory overhead cost variance unfavourable
(700.00)
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