Question

Blumen Textiles Corporation began April with a budget for 24,000 hours of production in the Weaving Department. The department has a full capacity of 32,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of April was as follows:

Variable overhead	$45,600
Fixed overhead	32,000
Total	$77,600

The actual factory overhead was $78,500 for April. The actual fixed factory overhead was as budgeted. During April, the Weaving Department had standard hours at actual production volume of 25,000 hours. Determine the variable factory overhead controllable variance and the fixed factory overhead volume variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.

a. Variable factory overhead controllable variance: $  

b. Fixed factory overhead volume variance: $

Answer 1

1) Variable factory overhead controllable variance = Standard variable overhead - Actual variable overhead

= (Standard hours * Standard rate of variable overhead ) - actual overhead

= (25,000hours*1.9$) – 46,500$ = (1000$) Favourable

Working:

Budgeted Variable Overhead rate per hour = Budgeted Variable Overhead/Total Budgeted hours

$45,600/24,000hours=1.9$

The actual factory overhead was $78,500

The actual fixed factory overhead was as budgeted

So the Actual Fixed Cost = $ 32,000 Then Actual variable factory overhead cost=78,500-32,000                                                                     =46,500$

2) Fixed factory overhead volume variance = Absorption rate of fixed overhead * ( Standard hours - Budgeted Hours)

= 1.33$ ( 25,000hours – 24,000hours) = (1,333$) favourable

Note:

Absorption rate of fixed Overhead per hour = Budgeted fixed Overhead/Total Budgeted hours

     32,000$/24,000hours=1.33$