Question

Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 16,000 hours for production:

Variable overhead costs:
Indirect factory labor	$41,600
Power and light	12,320
Indirect materials	20,800
Total variable overhead cost		$ 74,720
Fixed overhead costs:
Supervisory salaries	$68,400
Depreciation of plant and equipment	18,000
Insurance and property taxes	33,600
Total fixed overhead cost		120,000
Total factory overhead cost		$194,720

Tannin has available 20,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 15,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

Actual variable factory overhead costs:
Indirect factory labor	$38,030
Power and light	11,340
Indirect materials	20,500
Total variable cost	$69,870

Construct a factory overhead cost variance report for the Trim Department for July. Enter all amounts as positive numbers. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.

Tannin Products Inc.
Factory Overhead Cost Variance Report-Trim Department
For the Month Ended July 31
Productive capacity for the month 20,000 hrs.
Actual productive capacity used for the month 15,000 hrs.
	Budget (at actual production)	Actual	Favorable Variances	Unfavorable Variances
Variable factory overhead costs:
Indirect factory labor	$	$	$
Power and light
Indirect materials				$
Total variable factory overhead cost	$	$
Fixed factory overhead costs:
Supervisory salaries	$	$
Depreciation of plant and equipment
Insurance and property taxes
Total fixed factory overhead cost	$	$
Total factory overhead cost	$	$
Total controllable variances			$	$
Net controllable variance-favorable				$
Volume variance-unfavorable
Idle hours at the standard rate for fixed factory overhead
Total factory overhead cost variance-unfavorable				$

Answer 1

Particulars	Budget	Budget (at actual production)	Actual Production	Actual Favorable Variances	Unfavorable Variances
	(A)	(B)	( C)	(B-C)	(C-B)
Production Hours	16000	15000	15000
Variable factory overhead costs:
Indirect factory labor	41600	39000	38030	970
Power and light	12320	11550	11340	210
Indirect materials	20800	19500	20500		1000
Total variable factory overhead cost	74720	70050	69870	$
Fixed factory overhead costs:
Supervisory salaries	68400	68400	68400	$
Depreciation of plant and equipment	18000	18000	18000
Insurance and property taxes	33600	33600	33600
Total fixed factory overhead cost	120000	120000	120000	$
Total factory overhead cost	194720	190050	189870	$
Total controllable variances				1180	1000
Net controllable variance-favorable				180
Volume variance-unfavorable
Idle hours at the standard rate for fixed factory overhead					30000
Total factory overhead cost variance-unfavorable					1000
Calculation
Budget (at actual production) = Budgeted Cost at 16000 hrs *15000 hrs/16000 hrs
Fixed Overhead costs will remain the same even if production increases
Idle hours at the standard rate for fixed factory overhead = Total Fixed Overhead cost* 5000 hrs/20000 hrs