Question

Factory Overhead Cost Variances

Blumen Textiles Corporation began April with a budget for 48,000 hours of production in the Weaving Department. The department has a full capacity of 64,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of April was as follows:

Variable overhead	$163,200
Fixed overhead	115,200
Total	$278,400

The actual factory overhead was $281,700 for April. The actual fixed factory overhead was as budgeted. During April, the Weaving Department had standard hours at actual production volume of 50,000 hours. Determine the variable factory overhead controllable variance and the fixed factory overhead volume variance. 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. Variable factory overhead controllable variance: $______

b. Fixed factory overhead volume variance: $_______

Answer 1

Solution a:

Standard rate of variable overhead = $163,200 / 48000 = $3.40 per hour

Actual factory overhead = $281,700

Actual fixed factory overhead = $115,200

Actual variable factory overhead = $281,700 - $115,200 = $166,500

Variable factory overhead controllable variance = Budgeted variable overhead for standard hours - Actual variable overhead

= (SH * SR) - Actual variable overhead = (50000 * $3.40) - $166,500 = $3,500 F

Solution b:

Predetermined fixed overhead rate = $115,200 / 48000 = $2.40 per hour

Fixed overhead applied = 50000 * $2.40 = $120,000

Fixed factory overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

= $120,000 - $115,200 = $4,800 F