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 $21,440
   Power and light 15,477
   Indirect materials 13,467
    Total variable cost $50,384
Fixed costs:
   Supervisory salaries $11,250
   Depreciation of plant and equipment 28,860
   Insurance and property taxes 8,800
    Total fixed cost 48,910
Total factory overhead cost $99,294

During October, the department operated at 7,100 standard hours, and the factory overhead costs incurred were indirect factory wages, $22,950; power and light, $16,110; indirect materials, $14,600; supervisory salaries, $11,250; depreciation of plant and equipment, $28,860; and insurance and property taxes, $8,800.

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 $ $
$

Excess hours used over normal at the standard rate for fixed factory overhead
$

Answer 1

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	Budget	Actual	Favorable	Unfavorable
Variable costs:
Indirect factory wages 21440/6700*7100	$         22,720	$   22,950		$                 230
Power and light	$         16,401	$   16,110	$            291
Indirect materials	$         14,271	$   14,600		$                 329
Total variable cost	$         53,392	$   53,660
Fixed costs:
Supervisory salaries	$         11,250	$   11,250
Depreciation of plant and equipment	$         28,860	$   28,860
Insurance and property taxes	$            8,800	$      8,800
Total fixed cost	$         48,910	$   48,910
Total factory overhead cost	$       102,302	$ 102,570
Total controllable variances			$            291	$                 559
Net controllable variance-unfavorable				$                 268
Volume variance-favorable:
Excess hours used over normal at the standard rate for fixed factory overhead-working				$            -2,920
Total factory overhead cost variance-favorable				$            -2,652
Working:
Budgeted Fixed Overhead	$         48,910
Budgeted Hours	6,700
Per Hour Rate 48910/6700	$              7.30
Excess hours used over normal at the standard rate(7100-6700)*7.3	$            2,920