Question

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for...

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.

1

Variable costs:

2

Indirect factory wages

$30,240.00

3

Power and light

20,160.00

4

Indirect materials

16,800.00

5

Total variable cost

$67,200.00

6

Fixed costs:

7

Supervisory salaries

$20,000.00

8

Depreciation of plant and equipment

36,200.00

9

Insurance and property taxes

15,200.00

10

Total fixed cost

71,400.00

11

Total factory overhead cost

$138,600.00

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. 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

8,860 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


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