The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable
ID: 2370763 • Letter: T
Question
The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhad and $1.30 for fixed overhead) based on 100% capacity of 80,000 machine hours. The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows:
Actual Variable Factory Overhead: $360,000
fixed factory overhead 104,000
Standard hours allowed for units produced: 60,000 hours
What is the maount of the factory overhead volume variance & what is the amount of the factory overhead controllable variance?
options for both are:
a) 12,000U
b) 12,000F
c) 14000U
d) 26000U
Please provide explanation with answer
Explanation / Answer
Option C
As we know
Factory Overhead controllable variance = (Actual variable and fixed factory overhead) - (Standard factory overhead rate standard hours allows for Actual production
=(360000+104000)-(60000 hoursx7.50 per machine hour)
= 464000-450000
=14000 U
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