Question

iger 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.

1	Variable costs:
2	Indirect factory wages	$42,000.00
3	Power and light	26,880.00
4	Indirect materials	16,800.00
5	Total variable cost		$85,680.00
6	Fixed costs:
7	Supervisory salaries	$20,400.00
8	Depreciation of plant and equipment	35,400.00
9	Insurance and property taxes	15,600.00
10	Total fixed cost		71,400.00
11	Total factory overhead cost		$157,080.00

During May, the department operated at 8,740 hours, and the factory overhead costs incurred were indirect factory wages, $44,216; power and light, $28,240; indirect materials, $18,090; supervisory salaries, $20,400; depreciation of plant and equipment, $35,400; and insurance and property taxes, $15,600.

Use Correct Amount Descriptions

Depreciation of plant and equipment

Indirect factory wages

Indirect materials

Insurance and property taxes

Net controllable variance-favorable

Net controllable variance-unfavorable

Power and light

Supervisory salaries

Total controllable variances

Total factory overhead cost

Total factory overhead cost variance-favorable

Total factory overhead cost variance-unfavorable

Total fixed cost

Total variable cost

Volume variance-favorable

Volume variance-unfavorable

Required:

Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,740 hours. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Tiger Equipment Inc.

Factory Overhead Cost Variance Report—Welding Department

For the Month Ended May 31

1	Normal capacity for the month		8,400 hours
2	Actual production for the month		8,740 hours
3
4		Budget	Actual	Variances: Favorable	Variances: Unfavorable
5	Variable costs:
6
7
8
9
10	Fixed costs:
11
12
13
14
15
16
17
18
19
20

Answer 1

Tiger Equipment Inc. Factory Overhead Cost Variance Report - Welding Department
	For the Month Ended May 31
1	Normal capacity for the month				8,400 hours
2	Actual production for the month				8740 hours
3				Budget	Actual	Variances: Favorable	Variances: Unfavorable	Total Variances
4
5	Variable Costs:
6	Indirect Factory Wages			$43,700	$44,216		$516	$516
7				(42000×8740/8400)
8
9	Power Light			$29,383	$28,240	-$1,143		-$1,143
10				(28240×8740/8400)
11
12	Indirect Materials			$17,480	$18,090		$610	$610
13				(16800×8740/8400)
14	Total Variable Cost & Variance			$90,563	$90,546	-$1,143	$1,126	-$17
15
16	Fixed Costs:
17	Supervisory Salaries			$20,400	$20,400	$0	$0	$0
18	Depreciation Plant & Equipmet			$35,400	$35,400	$0	$0	$0
19	Insurance & Property Taxes			$15,600	$15,600	$0	$0	$0
20	Total Fixed Cost & Variance			$71,400	$71,400	$0	$0	$0