tiger Equipment Inc., a manufacturer of construction equipment, prepared the fol
ID: 2547666 • 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 8,700 hours.
1
Variable costs:
2
Indirect factory wages
$40,020.00
3
Power and light
20,880.00
4
Indirect materials
17,400.00
5
Total variable cost
$78,300.00
6
Fixed costs:
7
Supervisory salaries
$19,800.00
8
Depreciation of plant and equipment
35,700.00
9
Insurance and property taxes
18,450.00
10
Total fixed cost
73,950.00
11
Total factory overhead cost
$152,250.00
During May, the department operated at 9,080 hours, and the factory overhead costs incurred were indirect factory wages, $42,268; power and light, $22,064; indirect materials, $18,700; supervisory salaries, $19,800; depreciation of plant and equipment, $35,700; and insurance and property taxes, $18,450.
Required:
1
Variable costs:
2
Indirect factory wages
$40,020.00
3
Power and light
20,880.00
4
Indirect materials
17,400.00
5
Total variable cost
$78,300.00
6
Fixed costs:
7
Supervisory salaries
$19,800.00
8
Depreciation of plant and equipment
35,700.00
9
Insurance and property taxes
18,450.00
10
Total fixed cost
73,950.00
11
Total factory overhead cost
$152,250.00
Explanation / Answer
Planning Budget Activity Varaince F/U Flexible Budget Spending Variance F/U Actual Results Hours 8700 9080 9080 Variable costs: Indirect factory wages 40020 1748 U 41768 -500 U 42268 (4.6*9080) Power and light 20880 912 U 21792 -272 U 22064 (2.4*9080) Indirect materials 17400 760 U 18160 -540 U 18700 (2*9080) Total variable cost 78300 3420 81720 -1312 83032 Supervisory salaries 19800 0 19800 0 19800 Depreciation of plant and equipment 35700 0 35700 0 35700 Insurance and property taxes 18450 0 18450 0 18450 Total fixed cost 73950 0 73950 0 73950 Total factory overhead cost 152250 3420 U 155670 -1312 U 156982 Budgeted cost per unit: Indirect factory wages per unit = 40020/8700 = $4.6 Power and light cost per unit = 20880/8700 = $2.4 Indirect materials cost per unit = 17400/8700 = $2
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