Question

Thomas Textiles Corporation began November with a budget for 60,000 hours of production in the Weaving Department. The department has a full capacity of 75,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of November was as follows:

Variable overhead	$450,000
Fixed overhead	262,500
Total	$712,500

The actual factory overhead was $725,000 for November. The actual fixed factory overhead was as budgeted. During November, the Weaving Department had standard hours at actual production volume of 64,500 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: $_________ Unfavorable/Favorable

b. Fixed factory overhead volume variance: $_________ Unfavorable/Favorable

Answer 1

Answer:

Actual variable overhead          = Actual Factory overhead (-) Actual fixed Overhead          =   $ 725,000 (-) $ 262,500          =     $ 462,500

Variable Overhead rate           = Variable overhead / Production Hours            = $ 450,000 / 60,000 hours            =   $ 7.5 per Hour

Variable Factory overhead controllable variance                = (Actual Production x Variable Overhead rate ) (-) Actual variable overhead                =   ( 64,500 hours x $ 7.5 ) (-) $ 462,500                =    $ 483,750 (-) $ 462,500                =    $ 21,250 (Favourable )

Variable Factory overhead controllable variance =    $ 21,250 (Favourable )

2)

Fixed overhead rate               = Fixed Overhead / Normal Hours               =   $ 262,500 / 75,000               = $ 3.5 per Hour

Fixed overhead volume variance         =   Budgeted fixed overhead - Applied Fixed overhead          =     $ 262,500 (-) ( $ 3.5 x 64,500 )          = $ 262,500 (-) $ 225,750          =   $ 36,750 (Unfavorable)

Fixed overhead volume variance   =   $ 36,750 (Unfavorable)