Question

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

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

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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