Question

Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 8,000 hours for production: $25,600 Variable overhead cost: Indirect factory labor Power and light Indirect materials 6,000 8,800 Total variable overhead cost $ 40,400 Fixed overhead cost: Supervisory salaries Depreciation of plant and equipment $36,940 9,720 18,140 Insurance and property taxes Total fixed overhead cost 64,800 Total factory overhead cost $105,200 Tannin has available 12,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 7,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Actual variable factory overhead cost: Indirect factory labor Power and light $21,840 5,160 8,100 Indirect materials Total variable cost $35,100 Construct a factory overhead cost variance report for the Trim Department for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.

Answer 1

Tannin Products Inc. Factory Overhead Cost Variance Report : Trim Department For the month ended July 31
Productive capacity for the month 12,000 hrs.
Actual productive capacity used for the month : 7,000 hrs.
	Actual	Budget ( at actual production )	Unfavorable Variances	Favorable Variances
Variable factory overhead costs
Indirect factory labor	$ 21,840	$ 22,400		$ 560
Power and light	5,160	5,250		90
Indirect materials	8,100	7,700	$ 400
Total variable factory overhead cost	35,100	35,350	400	650
Fixed factory overhead costs
Supervisory salaries	36,940	36,940	0	0
Depreciation of plant and equipment	9,720	9,720	0	0
Insurance and Property Taxes	18,140	18,140	0	0
Total fixed factory overhead cost	64,800	64,800	0	0
Total factory overhead cost	99,900	100,150	400	650
Total controllable variances			400	650
Net controllable variance				250 Favorable