Question

Factory Overhead Cost Variances

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

Answer 1

1) Variable factory overhead controllable variance

= Actual variable factory overhead - Standard variable factory overhead

=Standard variable factory overhead = Total Budgeted factory overhead - Total Fixed factory Overhead

=65000 - 92500(6000 hours x 4.25)

= (2000) Favourable

2) Fixed factory overhead volume variance

= Budgeted fixed overhead (BFO)- Apllied fixed overheads (AFO)

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

=Total actual factory overhead -standard factory overhead

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

SFOH=4000 hours x21 =84000

=90500-84000= 6500 unfavourable