Question

Factory Overhead Cost Variances

Blumen Textiles Corporation began April with a budget for 38,000 hours of production in the Weaving Department. The department has a full capacity of 51,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of April was as follows:

Variable overhead	$133,000
Fixed overhead	91,800
Total	$224,800

The actual factory overhead was $227,500 for April. The actual fixed factory overhead was as budgeted. During April, the Weaving Department had standard hours at actual production volume of 40,000 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.

a. Determine the variable factory overhead controllable variance.
$

b. Determine the fixed factory overhead volume variance.
$  

Answer 1

Ans:

a. Determine the variable factory overhead controllable variance=Actual Overhead-standard overhead for actual Production=135,700-140,000=4300 F

Actual Variable overhead=227,500-91,800=$135,700

Standard variable overhead rate=overhead/budgeted hours=133,000/38000=3.5
Standard overhead for actual production=3.5*40,000=140,000

b. Determine the fixed factory overhead volume variance.

Fixed overhead rate*(normal capacity-standard Capacity)
=1.8(51000-40,000)=19800 U
Fixed Overhead rate=Fixed overhead/Normal Capacity=91800/51000=1.8

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