Question

Factory Overhead Cost Variances

The following data relate to factory overhead cost for the production of 7,000 computers:

Actual:	Variable factory overhead	$297,100
	Fixed factory overhead	68,750
Standard:	7,000 hrs. at $50	350,000

If productive capacity of 100% was 11,000 hours and the total factory overhead cost budgeted at the level of 7,000 standard hours was $375,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $6.25 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
Variable factory overhead controllable variance	$	Favorable
Fixed factory overhead volume variance		Unfavorable
Total factory overhead cost variance	$	Favorable

Answer 1

Answer
1. Variable Factory Overhead Controllable Variance .
Actual Variable Factory Overhead Cost incurred	$      297,100
Budgeted Variable Factory Overhead for 7,000 Hrs
( 7,000 ×( $50 - $ 6.25)	$      306,250
Variance -- Favourable	-$          9,150
2.Fixed Factory Overhead Volume Variance
Productive Capacity at 100 %	11,000 Hrs
Standard for amount produced	7,000 hrs
Productive Capacity not used	4,000 hrs
Standard Fixed Factory Overhead Rate	$6.25
Variance - Unfavourable	$25,000
3. Total Factory Overhead Cost varance
Variance ( Unfavorable ) = $ 15,850
Explanation;
Actual overhead - Applied Overhead = Total Overhead Variance
($297,100 + $68,750 ) - $350,000 = $ 15,850 ( UF)