Question

The standard costs and actual costs for factory overhead for the manufacture of 2,800 units of actual production are as follows:

	Standard Costs
Fixed overhead (based on 10,000 hours)	3 hours per unit at $0.74 per hour
Variable overhead	3 hours per unit at $2.06 per hour
Actual Costs
Total variable cost, $17,900
Total fixed cost, $7,800

The total factory overhead cost variance is

a.$1,780 favorable

b.$2,964 favorable

c.$596 unfavorable

d.$1,780 unfavorable

Answer 1

Hi, Friend...

Hope you are also doing well.

I have tried to give the best possible answer. If you have any doubts, please mention in the comment section. I'll definitely respond in early possible time.

Ans:

Total factory overhead cost variance is: d. $1,780 unfavourable

Workings:

Total factory overhead cost variance = fixed factory overhead variance (i) + variable factory overhead variance (ii)

= $1,184 unfavourable + $596 unfavourable

= $1,780 unfavourable.

(i) Calculation of fixed factory overhead variance:

formula = standard fixed overhead rate per hour x (standard hour for actual output - budgeted hour)

= $.74 x [(2800 x 3) - 10,000]

= $.74 x (1,600)

= $1,184 unfavourable

(ii) Calculation of variable factory overhead variance:

formula = standard variable cost - actual variable cost

= (2,800 unit x 3 hour per unit x $2.06 per hour) - $17,900

= $17,304 - $17,900

=$596 unfavourable

Thanks, Dear... Have a Wonderful Day... Keep Social Distancing.