Perma Weave Textiles Corporation began January with a budget for 22,000 hours of
ID: 2483174 • Letter: P
Question
Perma Weave Textiles Corporation began January with a budget for 22,000 hours of production in the Weaving Department. The department has a full capacity of 29,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of January was as follows:
Variable overhead $44,000
Fixed overhead 29,000
Total $73,000
The actual factory overhead was $73,900 for January. The actual fixed factory overhead was as budgeted. During January, the Weaving Department had standard hours at actual production volume of 23,000 hours. 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. Determine the variable factory overhead controllable variance. (Favorable)
b. Determine the fixed factory overhead volume variance (Unfavorable)
Explanation / Answer
a)
Controllable Variance = ( Standard variable overhead for actual production - Actual Variable Fcatory overhead )
Standard variable overhead rate = $44,000 / 22,000 = $2
Standard variable overhead for actual production = 23,000 * 2 = $46,000
Actual Variable Fcatory overhead = 44,000
Controllable Variance = ($46,000 - 44,000) = $2,000 Favorable
b)
Standard fixed overhead rate = 29,000 / 29,000 = $1
Volume Variance = ( Standard direct labor hours at actual production - Normal capacity in direct labor hours) * Standard rate
Standard direct labor hours at actual production = 23,000
Normal capacity in direct labor hours = 22,000
Volume Variance = (23,000 - 22,000) * $1 = $1000 Favorable
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