Question

The data related to Shunda Enterprises Inc.’s factory overhead cost for the production of 50,000 units of product are as follows:

Actual:	Variable factory overhead	$263,300
	Fixed factory overhead	188,800
Standard:	76,000 hrs. at $6 ($3.50 for variable factory overhead)	456,000

Productive capacity at 100% of normal was 75,000 hours, and the factory overhead cost budgeted at the level of 76,000 standard hours was $453,300. Based on these data, the chief cost accountant prepared the following variance analysis:

Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred	$263,300
Budgeted variable factory overhead for 76,000 hours	266,000
Variance—favorable			$(2,700)
Fixed factory overhead volume variance:
Normal productive capacity at 100%	75,000	hrs.
Standard for amount produced	76,000
Productive capacity not used	1,000	hrs.
Standard variable factory overhead rate	x $6
Variance—unfavorable			6,000
Total factory overhead cost variance—unfavorable			$3,300

Compute the following to assist you in identifying the errors in the factory overhead cost variance analysis. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.

Variance	Amount	Favorable/Unfavorable
Variable Factory Overhead Controllable Variance	$	Favorable
Fixed Factory Overhead Volume Variance	$	Favorable
Total Factory Overhead Cost Variance	$	Favorable

Answer 1