Question

The standard costs and actual costs for factory overhead for the manufacture of 2,900 units of actual production are as follows:

Standard Costs

Fixed overhead (based on 10,000 hours) 3 hours per unit at $0.72 per hour

Variable overhead 3 hours per unit at $1.99 per hour

Actual Costs

Total variable cost, $17,800

Total fixed cost, $7,900

The total factory overhead cost variance is

Answer 1

Total factory overhead cost variance = Total actual cost - Total standard cost

Total actual cost = Total variable cost + Total fixed cost

= $17,800 + $7,900

= $25,700

Total standard cost = Total standard variable cost + Total standard fixed costs

= (2,900 units * 3 hours per unit * $1.99) + (2,900 units * 3 hours per unit * $0.72)

= $17,313 + $6,264

= $23,577

Total factory overhead cost variance = $25,700 - $23,577

= $2,123 (U)

Variance is unfavorable because actual cost is more than the standard cost.