Question

Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 7,000 hours.

Variable costs:

Indirect factory wages $21,000

Power and light 15,540

Indirect materials 13,440

Total variable cost $49,980

Fixed costs:

Supervisory salaries $12,720

Depreciation of plant and equipment 32,630

Insurance and property taxes 9,950

Total fixed cost 55,300

Total factory overhead cost $105,280

During October, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $22,420; power and light, $16,130; indirect materials, $14,500; supervisory salaries, $12,720; depreciation of plant and equipment, $32,630; and insurance and property taxes, $9,950.

Required:

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 7,400 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.

Feeling Better Medical Inc.

   Factory Overhead Cost Variance Report—Assembly Department

     For the Month Ended October 31

Normal capacity for the month 7,000 hrs.

Actual production for the month 7,400 hrs.

Budget Actual Favorable Variances Unfavorable Variances

Variable costs:

Indirect factory wages   

Power and light   

Indirect materials

Total variable cost

Fixed costs:

Supervisory salaries

Depreciation of plant and equipment

Insurance and property taxes

Total fixed cost

Total factory overhead cost

Total controllable variances

Excess hours used over normal at the standard rate for fixed factory overhead

Answer 1

	Normal Capacity	7000	Hours
	Variable Cost
	Indirect Factory Wages	$    21,000.00
	Power & Light	$    15,540.00
	Indirect Material	$    13,440.00
	Total Variable Cost	$    49,980.00
	Fixed Cost
	Supervisory Salaries	$    12,720.00
	Depreciation of Plant & Equipment	$    32,630.00
	Insurance and Property taxes	$      9,950.00
	Total Fixed Cost	$    55,300.00
	Total factory overhead cost	$ 105,280.00
	Actual Hours	7400
	Actual Expenses
	Indirect Factory Wages	$    22,420.00
	Power & Light	$    16,130.00
	Indirect Material	$    14,500.00
	Supervisory Salaries	$    12,720.00
	Depreciation of Plant & Equipment	$    32,630.00
	Insurance and Property taxes	$      9,950.00
		Feeling Better Medical Inc.
	Normal Capacity	7000	Hours
	Actual Production for the month	7400	Hours
				Variance
		Budget	Actual	Favourable	Unfavourable
	Variable Cost
	Indirect Factory Wages	$    22,200.00	$    22,420.00		$          220.00
	Power & Light	$    16,428.00	$    16,130.00	$     (298.00)
	Indirect Material	$    14,208.00	$    14,500.00		$          292.00
	Total Variable Cost	$    52,836.00	$    53,050.00
	Supervisory Salaries	$    12,720.00	$    12,720.00
	Depreciation of Plant & Equipment	$    32,630.00	$    32,630.00
	Insurance and Property taxes	$      9,950.00	$      9,950.00
	Total Fixed Cost	$    55,300.00	$    55,300.00
	Total factory overhead cost	$ 108,136.00	$ 108,350.00	$     (298.00)	$          292.00
	Non Controllable Variance(Favourable)				$             (6.00)
	Volume Variance (Unfavourable)
	Excess Hours at Standard rate=(7400-7000)*$7.90			$    3,160.00
	Total factory Overhead cost variance-favourable			$    3,154.00
	Factory Overhead Rate=($55300/7000)	$               7.90
	Variable Cost (Budgeted)
	Indirect Factory Wages=(21000*(7400/7000))	$    22,200.00
	Power & Light=($15540*(7400/7000))	$    16,428.00
	Indirect Material=($13440*(7400/7000))	$    14,208.00