Question

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

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

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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