Question

Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of 7,000 computers: Actual: Variable factory overhead $130,700 Fixed factory overhead 52,250 Standard: 7,000 hrs. at $24 168,000 If productive capacity of 100% was 11,000 hours and the total factory overhead cost budgeted at the level of 7,000 standard hours was $187,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $4.75 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Variance Amount Favorable/Unfavorable Variable factory overhead controllable variance $ Fixed factory overhead volume variance Total factory overhead cost variance.

Answer 1

1. Variable Factory Overhead Controllable Variance .

Actual Variable Factory Overhead Cost incurred	$130,700
Budgeted Variable Factory Overhead for 7,000 Hrs
( 7,000 ×( $24 - $ 4.75)	$134,750
Variance -- Favourable	$ (4,050)

2.Fixed Factory Overhead Volume Variance

Productive Capacity at 100 %	11,000 Hrs
Standard for amount produced	7,000 hrs
Productive Capacity not used	4,000 hrs
Standard Fixed Factory Overhead Rate	$4.75
Variance - Unfavourable	$19,000

3. Total Factory Overhead Cost varance

Variance ( Unfavorable ) = $ 14,950

Explanation;

Actual overhead - Applied Overhead = Total Overhead Variance

($130,700 + $52,250 ) - $168,000 = $ 14,950 ( UF)