Question

actory Overhead Cost Variances

The following data relate to factory overhead cost for the production of 5,000 computers:

Actual:	Variable factory overhead	$97,000
	Fixed factory overhead	32,000
Standard:	5,000 hrs. at $24	120,000

If productive capacity of 100% was 8,000 hours and the total factory overhead cost budgeted at the level of 5,000 standard hours was $132,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $4 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	$
Volume variance	$
Total factory overhead cost variance	$

Answer 1

Factory overhead cost variance	Amount $
Variable factory overhead controllable variance
Actual Variable FO cost incurred	97,000
Less :Budgeted variable FO cost for 5,000 hrs. (5,000 x 20)	1,00,000
Variance		-3,000	Favorable
Fixed factory overhead volume variance
Hours at normal capacity	8,000
Less :Standard hours for amount produced	5,000
Productive capacity not used	3,000
x Standard fixed FO cost rate	4.00
Variance		12,000	UnFavorable
Total factory overhead cost variance		9,000	UnFavorable