Factory Overhead Cost Variances The following data relate to factory overhead co

Question

Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of 4,000 computers:

If productive capacity of 100% was 6,000 hours and the total factory overhead cost budgeted at the level of 4,000 standard hours was $178,500, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $5.25 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

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Roanoke Company produces chocolate bars. The primary materials used in producing chocolate bars are cocoa, sugar, and milk. The standard costs for a batch of chocolate (3,240 bars) are as follows:

Determine the standard direct materials cost per bar of chocolate. If required, round to the nearest cent.
$per bar

Actual: Variable factory overhead $142,600 Fixed factory overhead 31,500 Standard: 4,000 hrs. at $42 168,000

Explanation / Answer

1. Controllable Variance = Actual Quantity (Actual price - Budgeted price)

Variable budgeted price = 178500/4000-5.25 = 39.34

Variable Actual price = 142600/4000 = 35.65

Controllable variance = 4000(35.65 - 39.34) = 4000*3.69 = - 14,760 (Favourable)

2. Volume Variance = Fixed price (Budgeted Volume - Actual Volume)

= 5.25 (6000 - 4000) = 5.25*2000 = 10,500 (Unfavourable)

3. Total factory overhear cost variance = (1,42,600 + 31,500) - 1,78,500 = 4,400

2. Total standard cost per batch = (480*0.4+150*0.6+120*1.70) = 486

Bars per batch = 3,240 bars

Standard cost per bar = 486/3240 = $ 0.15 or 15 cents

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