Question

Factory Overhead Cost Variance Report

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,400 hours.

Variable costs:
Indirect factory wages	$30,240
Power and light	20,160
Indirect materials	16,800
Total variable cost		$67,200
Fixed costs:
Supervisory salaries	$20,000
Depreciation of plant and equipment	36,200
Insurance and property taxes	15,200
Total fixed cost		71,400
Total factory overhead cost		$138,600

During May, the department operated at 8,860 hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.

Required:

Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,860 hours. 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.

Tiger Equipment Inc.
Factory Overhead Cost Variance Report-Welding Department
For the Month Ended May 31
Normal capacity for the month 8,400 hrs.
Actual production for the month 8,860 hrs.
	Actual Cost	Budget (at Actual Production)	Unfavorable Variances	Favorable Variances
Variable factory overhead costs:
Indirect factory wages	$	$	$	$
Power and light
Indirect materials
Total variable cost	$	$
Fixed factory overhead costs:
Supervisory salaries	$	$
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost	$	$
Total factory overhead cost	$	$
Total controllable variances			$	$
Net controllable variance-unfavorable			$
Volume variance—favorable:
Excess hours used over normal at the standard rate for fixed factory overhead
Total factory overhead cost variance-favorable

ACCT 101B - CH 23 EXAMPLE 4

Answer 1

Answer:

Normal Capacity for the month	8,400 Hrs
Actual Production for the month	8,860 Hrs
	Actual Costs	Budget (At Actual Production)	Unfavorable Variance	Favourable Variance
Variable Factory Overhead Costs:
Indirect Factory Wages	32,400	31,896	504	-
Power & Light	21,000	21,264	-	264
Indirect Materials	18,250	17,720	530	-
Total Variable Costs	71,650	70,880
Fixed Factory Overhead Costs:
Supervisory Salaries	20,000	20,000	-	-
Depreciation of Plant & Equipment	36,200	36,200	-	-
Insurance & Property Taxes	15,200	15,200	-	-
Total Fixed Costs	71,400	71,400	-	-
Total Factory Overhead Costs	143,050	142,280
Total Controllable Variances			1,034	264
Net Controllable Variance - Unfavorable			770
Volume Variance - Favourable
Excess hours used over normal	-460 Hrs	$8.50	-3,910
Total Factory Overhead Cost Variance - Favourable			-3,140