iger Equipment Inc., a manufacturer of construction equipment, prepared the foll
ID: 2551633 • Letter: I
Question
iger 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
$42,000.00
3
Power and light
26,880.00
4
Indirect materials
16,800.00
5
Total variable cost
$85,680.00
6
Fixed costs:
7
Supervisory salaries
$20,400.00
8
Depreciation of plant and equipment
35,400.00
9
Insurance and property taxes
15,600.00
10
Total fixed cost
71,400.00
11
Total factory overhead cost
$157,080.00
During May, the department operated at 8,740 hours, and the factory overhead costs incurred were indirect factory wages, $44,216; power and light, $28,240; indirect materials, $18,090; supervisory salaries, $20,400; depreciation of plant and equipment, $35,400; and insurance and property taxes, $15,600.
Use Correct Amount Descriptions
Depreciation of plant and equipment
Indirect factory wages
Indirect materials
Insurance and property taxes
Net controllable variance-favorable
Net controllable variance-unfavorable
Power and light
Supervisory salaries
Total controllable variances
Total factory overhead cost
Total factory overhead cost variance-favorable
Total factory overhead cost variance-unfavorable
Total fixed cost
Total variable cost
Volume variance-favorable
Volume variance-unfavorable
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,740 hours. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Tiger Equipment Inc.
Factory Overhead Cost Variance Report—Welding Department
For the Month Ended May 31
1
Normal capacity for the month
8,400 hours
2
Actual production for the month
8,740 hours
3
4
Budget
Actual
Variances: Favorable
Variances: Unfavorable
5
Variable costs:
6
7
8
9
10
Fixed costs:
11
12
13
14
15
16
17
18
19
20
1
Variable costs:
2
Indirect factory wages
$42,000.00
3
Power and light
26,880.00
4
Indirect materials
16,800.00
5
Total variable cost
$85,680.00
6
Fixed costs:
7
Supervisory salaries
$20,400.00
8
Depreciation of plant and equipment
35,400.00
9
Insurance and property taxes
15,600.00
10
Total fixed cost
71,400.00
11
Total factory overhead cost
$157,080.00
Explanation / Answer
Tiger Equipment Inc.
Factory Overhead Cost Variance Report - Welding Department
Tiger Equipment Inc.
Factory Overhead Cost Variance Report - Welding Department
For the Month Ended May 31 1 Normal capacity for the month 8,400 hours2 Actual production for the month 8740 hours 3 Budget Actual Variances: Favorable Variances: Unfavorable Total Variances 4 5 Variable Costs: 6 Indirect Factory Wages $43,700 $44,216 $516 $516 7 (42000×8740/8400) 8 9 Power Light $29,383 $28,240 -$1,143 -$1,143 10 (28240×8740/8400) 11 12 Indirect Materials $17,480 $18,090 $610 $610 13 (16800×8740/8400) 14 Total Variable Cost & Variance $90,563 $90,546 -$1,143 $1,126 -$17 15 16 Fixed Costs: 17 Supervisory Salaries $20,400 $20,400 $0 $0 $0 18 Depreciation Plant & Equipmet $35,400 $35,400 $0 $0 $0 19 Insurance & Property Taxes $15,600 $15,600 $0 $0 $0 20 Total Fixed Cost & Variance $71,400 $71,400 $0 $0 $0
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