Tiger Equipment Inc., a manufacturer of construction equipment, prepared the fol
ID: 2525387 • Letter: T
Question
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 8,400 hours.
1
Variable costs:
2
Indirect factory wages
$30,240.00
3
Power and light
20,160.00
4
Indirect materials
16,800.00
5
Total variable cost
$67,200.00
6
Fixed costs:
7
Supervisory salaries
$20,000.00
8
Depreciation of plant and equipment
36,200.00
9
Insurance and property taxes
15,200.00
10
Total fixed cost
71,400.00
11
Total factory overhead cost
$138,600.00
During May, the department operated at 8,860 hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.
Required:
1
Variable costs:
2
Indirect factory wages
$30,240.00
3
Power and light
20,160.00
4
Indirect materials
16,800.00
5
Total variable cost
$67,200.00
6
Fixed costs:
7
Supervisory salaries
$20,000.00
8
Depreciation of plant and equipment
36,200.00
9
Insurance and property taxes
15,200.00
10
Total fixed cost
71,400.00
11
Total factory overhead cost
$138,600.00
Explanation / Answer
Answers
1
Variable costs:
Total at 8400 hours
Hours
Variable cost per hours
2
Indirect factory wages
$ 30,240.00
8400
$ 3.60
3
Power and light
$ 20,160.00
8400
$ 2.40
4
Indirect materials
$ 16,800.00
8400
$ 2.00
5
Total variable cost
$ 67,200.00
8400
$ 8.00
1
Variable costs:
Flexible Budget For 8860 hours
Actual Result for 8860 Hours
Variance
2
Indirect factory wages
$ 31,896.00
$ 32,400.00
$ 504.00
Unfavourable
3
Power and light
$ 21,264.00
$ 21,000.00
$ (264.00)
Favourable
4
Indirect materials
$ 17,720.00
$ 18,250.00
$ 530.00
Unfavourable
5
Total variable cost
$ 70,880.00
$ 71,650.00
$ 770.00
Unfavourable
6
Fixed costs:
$ -
7
Supervisory salaries
$ 20,000.00
$ 20,000.00
$ -
8
Depreciation of plant and equipment
$ 36,200.00
$ 36,200.00
$ -
9
Insurance and property taxes
$ 15,200.00
$ 15,200.00
$ -
10
Total fixed cost
$ 71,400.00
$ 71,400.00
$ -
11
Total factory overhead cost
$ 1,42,280.00
$ 1,43,050.00
$ 770.00
Unfavourable
1
Variable costs:
Total at 8400 hours
Hours
Variable cost per hours
2
Indirect factory wages
$ 30,240.00
8400
$ 3.60
3
Power and light
$ 20,160.00
8400
$ 2.40
4
Indirect materials
$ 16,800.00
8400
$ 2.00
5
Total variable cost
$ 67,200.00
8400
$ 8.00
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