During October, the plant was operated for 9,000 machine hours and the factory o

Question

During October, the plant was operated for 9,000 machine hours and the factory overhead costs incurred were as follows: indirect factory wages, $16,400; power and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000; depreciation of plant and equipment, $8,800; insurance and property taxes, $3,200.

Prepare a factory overhead cost variance report for October. (The budgeted amounts for actual amount produced should be based on 9,000 machine hours.)

Pinnacle Manufacturing Co. - Finishing Department

Factory Overhead Cost Variance Report

For Month Ended October 31, 20--

Productive capacity for the month

hours

Actual production for the month

hours

Budget

Actual

Indirect factory wages

$

$

Power and light

Indirect materials

Total variable cost

$

$

Budget

Actual

Supervisory salaries

$

$

Depreciation of plant and equipment

Insurance and property taxes

Total fixed cost

$

$

Total factory overhead cost

$

$

Variances Favorable

Variances Unfavorable

Indirect factory wages

$

Power and light

$

Indirect materials

Fixed costs:

Total controllable variances

$

$

Net controllable variance--favorable

$

Volume variance--unfavorable:

Idle hours at the standard rate for fixed overhead

Total factory overhead cost variance--unfavorable

$

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Prepare a factory overhead cost variance report for October. (The budgeted amounts for actual amount produced should be based on 9,000 machine hours.)

Pinnacle Manufacturing Co. - Finishing Department

Factory Overhead Cost Variance Report

For Month Ended October 31, 20--

Hours Information

Productive capacity for the month

hours

Actual production for the month

hours

Variable cost:

Budget

Actual

Indirect factory wages

$

$

Power and light

Indirect materials

Total variable cost

$

$

Fixed costs:

Budget

Actual

Supervisory salaries

$

$

Depreciation of plant and equipment

Insurance and property taxes

Total fixed cost

$

$

Total factory overhead cost

$

$

Variable cost:

Variances Favorable

Variances Unfavorable

Indirect factory wages

$

Power and light

$

Indirect materials

Fixed costs:

Total controllable variances

$

$

Net controllable variance--favorable

$

Volume variance--unfavorable:

Idle hours at the standard rate for fixed overhead

Total factory overhead cost variance--unfavorable

$

Explanation / Answer

Answer: Productive capacity for the month=10000 hours

Actual production for the month=9000 hours

Variable Cost Particulars Budget ($) Actual ($) Indirect factory wages 16200 16400 Power and light 10800 10000 Indirect materials 3600 3000 Total variable cost 30600 29400 Fixed costs: Supervisory salaries 12000 12000 Depreciation of plant and equipment 8800 8800 Insurance and property taxes 3200 3200 Total fixed cost 24000 24000 Total factory overhead cost 54600 53400 Particulars Variances Favorable Variances Unfavorable Indirect factory wages $200 Power and light 800 Indirect materials 600 Fixed costs: Total controllable variances 1400 $200 Net controllable variance--favorable 1200 Volume variance--unfavorable: Idle hours at the standard rate for fixed overhead 2400 Total factory overhead cost variance--unfavorable 3600

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