Question

actory Overhead Cost Variances

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

Actual:	Variable factory overhead	$90,200
	Fixed factory overhead	34,500
Standard:	4,000 hrs. at $29	116,000

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 $127,500, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $5.75 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
Controllable variance	$	Favorable
Volume variance	$	Unfavorable
Total factory overhead cost variance	$	Unfavorable

Answer 1

Ans:

1) Variable overhead controllable variance =

Actual variable factory overhead - Budgeted variable factory overhead

= $90,200 - 4000*($29- $5.75)

= $ (2800) Favourable

2) Fixed factory overhead volume variance = (Standard hrs for 100% of normal capacity - Standard hrs for actual units produced) *Fixed factory overhead rate = (6000 -4000)*$5.75 = $ 11500.00 Unfavourable

3) Total factory cost variance = Variable factory overhead controllable variance + Fixed factory overhead volume variance

= ($2800) + $11500

=$8,700 unfavourable

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