Question

Factory Overhead Cost Variance Report

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 6,700 hours.

Variable costs:
Indirect factory wages	$20,100
Power and light	14,271
Indirect materials	12,261
Total variable cost		$46,632
Fixed costs:
Supervisory salaries	$13,560
Depreciation of plant and equipment	34,790
Insurance and property taxes	10,610
Total fixed cost		58,960
Total factory overhead cost		$105,592

During October, the department operated at 7,100 standard hours, and the factory overhead costs incurred were indirect factory wages, $21,510; power and light, $14,850; indirect materials, $13,300; supervisory salaries, $13,560; depreciation of plant and equipment, $34,790; and insurance and property taxes, $10,610.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 7,100 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.

Feeling Better Medical Inc.
Factory Overhead Cost Variance Report—Assembly Department
For the Month Ended October 31
Normal capacity for the month 6,700 hrs.
Actual production for the month 7,100 hrs.
	Budget	Actual	Favorable Variances	Unfavorable Variances
Variable costs:
Indirect factory wages	$	$		$
Power and light			$
Indirect materials
Total variable cost	$	$
Fixed costs:
Supervisory salaries	$	$
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost	$	$
Total factory overhead cost	$	$
Total controllable variances			$	$
Net controllable variance-unfavorable				$
Volume variance-favorable
Excess hours used over normal at the standard rate for fixed factory overhead
Total factory overhead cost variance-favorable				$

Answer 1

	FEELING BETTER MEDICAL, INC.
	Factory Overhead Cost Variance Report Assembly Department
Normal capacity for the month:			6,700		hours
Actual production for the month:			7,100		hours
			Budget
			(at actual				Variances
			production)		Actual		Favorable		Unfavorable
Variable costs:
	Indirect factory wages	$20,100/6,700*7,100	$       21,300		$      21,510		$              -		$          210
	Power and light	$14,271/6,700*7,100	15,123		14,850		273		-
	Indirect materials	$12,261/6,700*7,100	12,993		13,300		-		307
	Total variable cost		$       49,416		$      49,660
Fixed costs:
	Supervisory salaries		$       13,560		$      13,560		-		-
	Depreciation of plant and equip.		34,790		34,790		-		-
	Insurance and property taxes		10,610		10,610		-		-
	Total fixed cost		$       58,960		$      58,960
Total factory overhead cost			$      108,376		$    108,620
Total controllable variances							$          273		$          517
Net controllable variance (favorable) unfavorable									244
	Idle (Excess) Hours			´	Fixed Factory OH Rate
Volume variance (fav.) unfav.		7,100-6,700 and $58,960/6,700	400		$8.80				3,520
Total factory overhead cost variance (favorable) unfavorable									$       3,764