In: Accounting
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,400 hours.
TIGER EQUIPMENT INC. |
Factory Overhead Cost Budget-Welding Department |
For the Month Ended May 31 |
1 |
Variable costs: |
||
2 |
Indirect factory wages |
$30,240.00 |
|
3 |
Power and light |
20,160.00 |
|
4 |
Indirect materials |
16,800.00 |
|
5 |
Total variable cost |
$67,200.00 |
|
6 |
Fixed costs: |
||
7 |
Supervisory salaries |
$20,000.00 |
|
8 |
Depreciation of plant and equipment |
36,200.00 |
|
9 |
Insurance and property taxes |
15,200.00 |
|
10 |
Total fixed cost |
71,400.00 |
|
11 |
Total factory overhead cost |
$138,600.00 |
During May, the department operated at 8,860 standard hours. The factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,860 hours. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all variances as positive amounts. |
Budget | Actual | Variance | ||
Hours | 8860 | 8860 | ||
Variable Costs | ||||
Indirect Factory Wages | $ 31,896 | $ 32,400 | $ 504 | Unfavorable |
Power and Light | $ 21,264 | $ 21,000 | $ 264 | Favorable |
Indirect Materials | $ 17,720 | $ 18,250 | $ 530 | Unfavorable |
Total Variable Costs | $ 70,880 | $ 71,650 | $ 770 | Unfavorable |
Fixed Costs | ||||
Supervisory Salaries | $ 20,000 | $ 20,000 | $ - | Neither Favorable nor Unfavorable |
Depreciation | $ 36,200 | $ 36,200 | $ - | Neither Favorable nor Unfavorable |
Insurance and Property Taxes | $ 15,200 | $ 15,200 | $ - | Neither Favorable nor Unfavorable |
Total Fixed Costs | $ 71,400 | $ 71,400 | $ - | Neither Favorable nor Unfavorable |
Total Costs | $ 142,280 | $ 143,050 | $ 770 | Unfavorable |