The following data relate to factory overhead cost for the production of 7,000 c
ID: 2714576 • Letter: T
Question
The following data relate to factory overhead cost for the production of 7,000 computers:
If productive capacity of 100% was 11,000 hours and the factory overhead cost budgeted at the level of 7,000 standard hours was $435,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $7.25 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 $344,600 Fixed factory overhead 79,750 Standard: 7,000 hrs. at $58.00 406,000Explanation / Answer
Controllable variance Actual variable factory overhead cost incurred Budgeted variable factory overhead Variance Given [7,000 x ($58.00 - 7.25) 344600 355250 -10650 Favorable Volume variance Productive capacity =11000 Standard hour Used =7000 Underutilized capacity =11000-7000 =3000 Unfavorable variance =3000*7.25 fix overhead rate =21750 Variance Amount Favorable/Unfavorable Controllable variance 10650 Favorable Volume variance -21750 Un favourable Total factory overhead cost variance: -11100 Un favourable
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