Question

Factory Overhead Cost Variances

The following data relate to factory overhead cost for the production of 8,000 computers:

Actual:	Variable factory overhead	$188,200
	Fixed factory overhead	61,750
Standard:	8,000 hrs. at $29	232,000

If productive capacity of 100% was 13,000 hours and the total factory overhead cost budgeted at the level of 8,000 standard hours was $255,750, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $4.75 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Variance	Amount	Favorable/Unfavorable
Variable factory overhead controllable variance	$
Fixed factory overhead volume variance
Total factory overhead cost variance	$

Answer 1

Answer :- Calculation of Factory Overhead Cost Variances :-

1. Variable Factory overhead controllable Variance = Actual variable Factory overhead cost incurred - Budgeted Variable Factory overhead for 8,000 hrs.

Variable Factory overhead controllable variance = $188,200 - [8,000 * ($29 - $4.75)]

Variable Factory overhead controllable Variance = ($5,800) Favorable

2. Fixed Factory overhead volume Variance = (Productive Capacity at 100% - Standard for amount produced )* Standard fixed Factory overhead rate

Fixed Factory overhead volume Variance = ( 13,000 - 8,000)*$4.75

Fixed Factory overhead volume Variance = $23,750 Unfavorable

3. Total Factory overhead cost Variance = Actual Overhead - Applied overhead

Total Factory overhead cost Variance = ( $188,200 + $61,750) - $232,000

Total Factory overhead cost Variance = $17,950 Unfavorable

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