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 18,000 hours for production: Variable overhead cost: Indirect factory labor $43,200 Power and light 13,500 Indirect materials 21,600 Total variable overhead cost $ 78,300 Fixed overhead cost: Supervisory salaries $76,490 Depreciation of plant and equipment 20,130 Insurance and property taxes 37,580 Total fixed overhead cost 134,200 Total factory overhead cost $212,500 Tannin has available 22,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 17,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Actual variable factory overhead cost: Indirect factory labor $39,780 Power and light 12,520 Indirect materials 21,400 Total variable cost $73,700 Construct a factory overhead cost variance report for the Trim Department for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.

Answer 1

Tanin Products Inc.
Factory Overhead Cost Variance Report
For the Current Year
			Variances
	Budgeted	Actual	Favourable	Unfavourable
Variable Factory Overhead Costs:
Indirect Factory labor	$                        40,800	$              39,780	$                   1,020
Power and Light	$                        12,750	$              12,520	$                      230
Indirect Material	$                        20,400	$              21,400		$                        1,000
Total Variable Factory Overhead Costs	$                        73,950	$              73,700
Fixed Factory Overhead Costs:
Supervisory Salaries	$                        76,490	$              76,490
Depreciation-Plant & Equipment	$                        20,130	$              20,130
Insurance and Property taxes	$                        37,580	$              37,580
Total Fixed Factory Overhead Costs	$                      134,200	$            134,200
Total Factory Overhead Costs	$                      208,150	$            207,900
Total Controllable Variances			$                   1,250	$                        1,000
Non Controllable Variance				$                           250
Volume Varaiance-Unfavourable				$                        6,100
Capacity not used at standard rate for fixed overhead
[(18,000-17,000)*($134,200/22,000)]
Total Factory overhead Cost variance-Unfavourable				$                        5,850