Question

Factory Overhead Cost Variances

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

Actual:	Variable factory overhead	$116,400
	Fixed factory overhead	30,000
Standard:	4,000 hrs. at $35	140,000

If productive capacity of 100% was 6,000 hours and the factory overhead cost budgeted at the level of 4,000 standard hours was $150,000, 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 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	$
Volume variance	$
Total factory overhead cost variance:	$

Answer 1

Variance	Amount	Favorable/Unfavorable
Controllable variance	3600	Favorable
Volume variance	10,000	Unfavorable
Total factory overhead cost variance:	6,400	Unfavorable

Working Notes for the above answer is as under

1

Variable factory overhead Controllable Variance

=116400-4000*30

= 116400-120,000

=$3600 Favorable

2

fixed factory overhead volume variance

= 30,000-4000*5

= 30,000-20,000

= $10,000 Unfavorable

Total factory overhead cost variance

=(116400+30,000)-(4000*35)

= $146400-140,000

=$6400 Unfavorable