Factory Overhead Cost Variances The following data relate to factory overhead co

Question

Factory Overhead Cost Variances

The following data relate to factory overhead cost for the production of 6,000 computers:

If productive capacity of 100% was 10,000 hours and the factory overhead cost budgeted at the level of 6,000 standard hours was $302,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $6.5 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 $229,900 Fixed factory overhead 65,000 Standard: 6,000 hrs. at $46 276,000

Explanation / Answer

Note :

Actual Variable factory o/h - (Std hrs * Std.var factory o/h per hr)

$229,900 - ( 6,000 hrs * $39.50)

Actual Fixed factory o/h - (Std hrs * Std.fixed factory o/h per hr)

$65,000 - (6,000 hrs * $6.5)

Actual total factory o/h -  (Std hrs * Std.factory o/h per hr)

($229,900 + $65,000) - (6,000 hrs * $46)

Note :

Variance Formula & working Amount Favorable/Unfavorable Controllable variance

Actual Variable factory o/h - (Std hrs * Std.var factory o/h per hr)

$229,900 - ( 6,000 hrs * $39.50)

($7,100) Favorable Volume variance

Actual Fixed factory o/h - (Std hrs * Std.fixed factory o/h per hr)

$65,000 - (6,000 hrs * $6.5)

$26,000 Unfavorable Total factory overhead cost variance:

Actual total factory o/h -  (Std hrs * Std.factory o/h per hr)

($229,900 + $65,000) - (6,000 hrs * $46)

$18,900 Unfavorable

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