Question

Factory Overhead Cost Variances

The following data relate to factory overhead cost for the production of 3,000 computers:

Actual: | Variable factory overhead | $122,200 |

Fixed factory overhead | 35,000 | |

Standard: | 3,000 hrs. at $49 | 147,000 |

If productive capacity of 100% was 5,000 hours and the total factory overhead cost budgeted at the level of 3,000 standard hours was $161,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $7 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 | $ 14000 | Unfavorable |

Total factory overhead cost variance | $ | Unfavorable |

Answer #1

**1.Variable Factory overhead controllable
variance.**

Actual Variable Factory overhead incurred = $ 122200

Budgeted factory variable overhead for $3000hrs = $ 126000

(3000* (49-7))

**Favourable variance = - $ 3800
(minus $3800)**

**2. Fixed factory overhead volume variance**

Total production capacity at 100% = 5000hours

Standard production = 3000hours

Production capacity not used = 2000hours

Standard fixed factory overhead rate = $7 per hour

**Unfavourable variance = $
14000 (positive $ 14000)**

**Total Factory overhead cost variance - Unfavourable =
$10200 (positive)**

**Conclusion:**

Variance | Amount | Favorable/Unfavorable |

Controllable variance | $-3800 | Favourable |

Volume variance | $ 14000 | Unfavorable |

Total factory overhead cost variance | $10200 | Unfavorable |

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