Question

Factory Overhead Cost Variance Report

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 8,000 hours for production:

Variable overhead costs:
Indirect factory labor	$24,800
Power and light	6,000
Indirect materials	10,400
Total variable overhead cost		$ 41,200
Fixed overhead costs:
Supervisory salaries	$33,520
Depreciation of plant and equipment	8,820
Insurance and property taxes	16,460
Total fixed overhead cost		58,800
Total factory overhead cost		$100,000

Tannin has available 12,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 7,000 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	$21,160
Power and light	5,160
Indirect materials	9,600
Total variable cost	$35,920

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 12,000 hrs.
Actual productive capacity used for the month 7,000 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			$	$
				$
Idle hours at the standard rate for fixed factory overhead
				$

Please explain steps

Answer 1

Productive capacity for the month	12000
Actual productive capacity used for the month	7000
	Budget (at actual production)	Actual	Favorable Variances	Unfavorable Variances
Variable factory overhead costs:
Indirect factory labor	$             21,700	$          21,160	$      (540)
Power and light	$                5,250	$             5,160	$         (90)
Indirect materials	$                9,100	$             9,600		$       500
Total variable factory overhead cost	$             36,050	$          35,920
Fixed factory overhead costs:
Supervisory salaries	$             33,520	$          33,520
Depreciation of plant and equipment	$                8,820	$             8,820
Insurance and property taxes	$             16,460	$          16,460
Total fixed factory overhead cost	$            58,800	$          58,800
Total factory overhead cost	$             94,850	$          94,720
Total controllable variances			$      (630)	$       500
Net Controllable variance-Favorable			$      (130)
Volume variance-Unfavorable
Idle hours at the standard rate for fixed factory overhead				$ 24,500
Total factory overhead cost variance -Unfavorable				$ 24,370

Idle hours at the standard rate for fixed factory overhead = (12000 hours – 7000 hours) * $4.9 = $24500

$58800/12000 = $4.9