Question

Factory Overhead Cost Variance Report

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 20,000 hours for production:

Variable overhead costs:
Indirect factory labor	$46,000
Power and light	12,000
Indirect materials	20,000
Total variable overhead cost		$78,000
Fixed overhead costs:
Supervisory salaries	$54,500
Depreciation of plant and equipment	40,000
Insurance and property taxes	35,500
Total fixed overhead cost		130,000
Total factory overhead cost		$208,000

Tannin has available 25,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 22,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

Actual variable factory overhead $49,700 Indirect factory labor Power and light Indirect materials 13,000 24,000 Total variable cost $86,700 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 25,000 hrs.
Actual productive capacity used for the month 22,000 hrs.
	Actual cost	Budgeted (at actual production )		Unfavorable Variances	Favorable Variances
Variable Overhead costs
Indirect factory labor	$ 49,700	$ 50,600	($ 46,000/20,000 hours * 22,000 hours)		$ 900
Power and light	$ 13,000	$ 13,200	($ 12,000/20,000 hours * 22,000 hours)		$ 200
Indirect Materials	$ 24,000	$ 22,000	($ 20,000/20,000 hours * 22,000 hours)	$ 2,000
Total Variable factory overhead cost	$ 86,700	$ 85,800
Fixed factory overhead costs:
Supervisory salaries	$ 54,500	$ 54,500
Depreciation of plant and equipment	$ 40,000	$ 40,000
Insurance and property taxes	$ 35,500	$ 35,500
Total fixed factory overhead cost	$ 130,000	$ 130,000
Total factory overhead cost	$ 216,700	$ 215,800
Total controllable variances				$ 900
Net controllable variance - unfavorable				$ 900
Volume variance-unfavorable:
Idle hours at the standard rate for fixed factory overhead				$ 15,600
Total factory overhead cost variance - unfavorable				$ 16,500