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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.
Line Item Description Amount Amount
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.
Normal capacity for the month 8,400 hrs.
Actual production for the month 8,860 hrs.
Tiger Equipment Inc.
Factory Overhead Cost Variance Report-Welding Department
For the Month Ended May 31
Tiger Equipment Inc.
Factory Overhead Cost Variance Report-Welding Department For the Month Ended May 31
Budget (at Actual Production)
Actual Cost
Line Item Description
Unfavorable Variances
Favorable Variances
Variable factory overhead costs:
Indirect factory wages
$32,400
$31,896 V
$69
$504
0
Power and light
$21,000
$21,264 V
V
$264 X
Indirect materials
$18,250
$17,720 V
$530
0
Total variable cost
$71,650
$70,880
Fixed factory overhead costs:
Supervisory salaries
$20,000
$20,000
Depreciation of plant and equipment
$36,200
$36,200 V
Insurance and property taxes
$15,200
$15,200
Total fixed cost
$71,400
$71,400
Total factory overhead cost
$143,050
$142,280
Total controllable variances
$1,034
$264
Net controllable variance-unfavorable
$770
Volume variance-favorable:
Excess hours used over normal at the standard rate for fixed factory overhead
$3,910 X
Total factory overhead cost variance-favorable
$142,280