Question

The following data relate to factory overhead cost for the production of 7,000 computers: Actual: Variable factory overhead $152,800 Fixed factory overhead 49,500 Standard: 7,000 hrs. at $27 189,000 If productive capacity of 100% was 11,000 hours and the total factory overhead cost budgeted at the level of 7,000 standard hours was $207,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $4.5 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 Controllable variance $ Volume variance $ Total factory overhead cost variance $

Answer 1

Variable factory overhead controllable variance = $4,700 Favorable

Fixed overhead volume variance = $18,000 unfavorable

Total factory overhead cost variance = $22,700 Unfavorable

Step-by-step explanation:

Variable factory overhead rate = $27 - $4.50

= $22.50

Standard variable overhead for actual production = 7,000 × $22.50

= $157,500

Variable factory overhead controllable variance = Standard variable overhead for actual production - Actual variable overhead

= $157,500 - $152,800

= $4,700 Favorable

Fixed overhead applied = 7,000 × $4.50

= $31,500

Budgeted fixed overhead = $207,000 - $157,500

= $49,500

Fixed overhead volume variance = Fixed overhead applied - Budgeted fixed overhead

= $31,500 - $49,500

= $18,000 Unfavorable

Fixed overhead budget variance = Budgeted fixed overhead - Actual fixed overhead

= $49,500 - $49,500

= $0

Total factory overhead cost variance = Controllable variance + Fixed overhead volume variance

= $4,700 + $18,000

= $22,700 Unfavorable

Therefore we have computed all the three points by applying the above formula.