Question

# Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of...

The following data relate to factory overhead cost for the production of 4,000 computers:

 Actual: Variable factory overhead \$65,000 Fixed factory overhead 25,500 Standard: 4,000 hrs. at \$21 84,000

If productive capacity of 100% was 6,000 hours and the total factory overhead cost budgeted at the level of 4,000 standard hours was \$92,500, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was \$4.25 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 \$ Favorable Fixed factory overhead volume variance Unfavorable Total factory overhead cost variance \$ Unfavorable

1) Variable factory overhead controllable variance

=65000 - 92500(6000 hours x 4.25)

= (2000) Favourable

2) Fixed factory overhead volume variance

BFO= Budgeted hours x standard rate = 6000 x 4.25 = 25500

AFO= Standard lab hours for actual production x standard rate =4000 x 4.25= 17000

=25500-17000

=8500 Unfavourable

3) Total factory overhead cost variance

= contol variancree + volume variancr

=(2000)+8500

=6500 unfavourable

Altrnatively

TAFOH=Variale OH + Fixed OH =65000+25500=90500

SFOH=4000 hours x21 =84000

=90500-84000= 6500 unfavourable

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