Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prep

Question

Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 8,900 hours.

During October, the department operated at 9,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $27,530; power and light, $18,830; indirect materials, $16,700; supervisory salaries, $18,220; depreciation of plant and equipment, $46,730; and insurance and property taxes, $14,260.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 9,400 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. If an amount box does not require an entry, leave it blank.

Variable costs:    Indirect factory wages $25,810    Power and light 18,156    Indirect materials 15,486     Total variable cost $59,452 Fixed costs:    Supervisory salaries $18,220    Depreciation of plant and equipment 46,730    Insurance and property taxes 14,260     Total fixed cost 79,210 Total factory overhead cost $138,662

Explanation / Answer

Feeling Better Medical Inc.

Factory Overhead Cost Variance Report: Assembly Department

For the month ended October 31

Normal Capacity : 8,900 hours Actual Production : 9,400 hours Budget Actual Favorable Variances Unfavorable Variances Variable Costs $ $ Indirect Factory Wages 27,260 27,530 270 Power and Light 19,176 18,830 - 346 Indirect Materials 16,356 16,700 344 Total Variable Cost 62,792 63,060 268 Fixed Costs Supervisory Salaries 19,244 18,220 - 1,024 Depreciation on Plant and Equipment 49,355 46,730 - 2,625 Insurance and Property Taxes 15,061 14,260 - 801 Total Fixed Cost 83,660 79,210 - 4,450 Total Factory Overhead Cost 146,452 142,270 - 4,182 Total Controllable Variances 268 Net Controllable Variance: Unfavorable 268 Volume Variance: Favorable - 4,450 Excess hours used 500 Total Factory Overhead Cost Variance : Favorable - 4,182

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