Question

Factory Overhead Cost Variance Report 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 8,400 hours. Variable costs: Indirect factory wages $30,240 Power and light 20,160 Indirect materials 16,800 Total variable cost $67,200 Fixed costs: Supervisory salaries $20,000 Depreciation of plant and equipment 36,200 Insurance and property taxes 15,200 Total fixed cost 71,400 Total factory overhead cost $138,600 During May, the department operated at 8,860 hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.

Answer 1

Solution: Tiger Equipment Inc. Page! Factary Overhead Cat Variance Report-Welding Department For the Month Ended May 31 Normal Capacity for the Budget morth 8400 hours. Artual (at Actual unfavorable Fauorable Actual Production for the Lost Production) Variances Variances marth 88 60 hours $ Variable factory overhead costs : Indirect 504 factory wages 32,400 31,896 21,000 21,264 (+264 $ Power and light O Indirect materials 18,250 17,720 530 Total Variable last 71,650 70880 20,000 20.000 36,200 36,200 Fixed factory overhead Costs: Supervisory saleries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead Cost 15,200 15,200 71,400 71,400 143,050 142,280

Page 2 Budget Actual | Cat Actual Unfauorable Fauorable Cost Production | Hariances Variances 5 $ 1034 (-) 264 770 Total controllable Variames Unfauorable Volume variance fauorable Excess hours used normal at the standard rate for fixed factory overhead (84001–18860)X8.50 (-)3910 over Total Factory Quechead (-) 3,140 Cat Variance - Fauorable Variance Working Mote & fixed Factory Querhead Pate Total fixed Overhead Cost et / Marmel Capacity Hours $71,400/8400 hours = $8.50 per hour