Factory Overhead Cost Variances The following data relate to factory overhead co
ID: 2520751 • Letter: F
Question
Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of 8,000 computers Actual: Variable factory overhead $186,200 52,000 224,000 Fixed factory overhead Standard 8,000 hrs. at $28 If productive capacity of 100% was 13,000 hours and the total factory overhead cost budgeted at the level of 8,000 standard hours was $244,000, 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 Controllable variance Volume variance Amount Favorable/Unfavorable Total factory overhead cost varianceExplanation / Answer
SOLUTION
Factory Overhead Controllable Variance = Actual Variable overheads - Budgeted Variable overheads
= $186,200 - [8,000 * ($28 - $4)]
= $186,200 - $192,000
= $5,800 (F)
Fixed Factory Overhead Volume Variance =
= (Standard Hours for 100% of Normal Capacity - Standard Hours for Actual Units Produced) * Fixed Factory Overhead Rate
= (13,000 hours - 8,000 hours) * $4
= 5,000 hours * $4
= $20,000 (U)
Total factory overhead cost variance = $5,800 (F) + $20,000 (U) = $14,200 (U)
Variance Amount ($) Favourable / Unfavourable Factory Overhead Controllable Variance 5,800 Favourable Fixed Factory Overhead Volume Variance 20,000 Unfavourable Total factory overhead cost variance 14,200 UnfavourableRelated Questions
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