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 22,000 hours for production:

1	Variable overhead cost:
2	Indirect factory labor	$55,000.00
3	Power and light	11,000.00
4	Indirect materials	22,000.00
5	Total variable overhead cost		$88,000.00
6	Fixed overhead cost:
7	Supervisory salaries	$52,600.00
8	Depreciation of plant and equipment	39,400.00
9	Insurance and property taxes	137,500.00
10	Total fixed overhead cost		229,500.00
11	Total factory overhead cost		$317,500.00

Tannin has available 27,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 24,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

1	Actual variable factory overhead cost:
2	Indirect factory labor	$59,140.00
3	Power and light	11,760.00
4	Indirect materials	27,000.00
5	Total variable cost	$97,900.00

Required:

Construct a factory overhead cost variance report for the Trim Department for July. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Answer 1

Soltion:

AR УИ Tannin Products Inc. Factory Overhead Cost Variance Report-Trim Department For the Month Ended July 31 6 Productive capacity for the month 27,000 hrs Actual productive capacity used for the month 24,000 hrs. Unfavorable 8 Particulars Actual favorable Variances Budget (At actual prodcution) variances -$860.00 -$240.00 $59,140.00 $11,760.00 $27,000.00 $97,900.00 $60,000.00 $12,000.00 $24,000.00 $96,000.00 $3,000.00 9 Variable factory overhead costs: 10 Indirect factory labor 11 Power and light 12 Indirect materials 13 Total variable factory overhead cost 14 Fixed factory overhead costs: 15 Supervisory salaries 16 Depreciation of plant and equipment 17 Insurance and property taxes 18 5 Total fixed factory overhead cost 19 Total factory overhead cost 20 Total controllable variances 21 Net controllable variance Unfavorable Volume variance unfavorable Idle hours at the standard rate for fixed factory overhead ($229500/27000*3000) Total factory overhead cost variance unfavorable $52,600.00 $39,400.00 $137,500.00 $229,500.00 $327,400.00 $52,600.00 $39,400.00 $137,500.00 $229,500.00 $325,500.00 -$1,100.00 $3,000.00 $1,900.00 $25,500.00 $27,400.00 = 53 55 57 58 et726 Sheet727 ) Sheet728 Sheet729 Sheet390 (3)