Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of 3,000 computers: Actual: Variable factory overhead $97,500 Fixed factory overhead 27,500 Standard: 3,000 hrs. at $39 117,000 If productive capacity of 100% was 5,000 hours and the total factory overhead cost budgeted at the level of 3,000 standard hours was $128,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $5.5 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 $
(1)
Variable factory overhead controllable variance = standard variable overhead costs - actual variable overhead costs
= {3000 x ($39 - $5.5)} - $97500
= -$3000 Favorable
“must put minus sign before the figure”
(2)
unutilized capacity = productive capacity - used capacity
= 5000 - 3000
= 2000 hours
Fixed factory overhead volume variance = unutilized capacity x budgeted fixed factory overhead rate
= 2000 x $5.5
= $11000 Unfavorable
(3)
Total factory overhead cost variance = controllable variance + volume variance
= -$3000 Favorable + $11000 Unfavorable
= $8000 Unfavorable
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