Question

Factory Overhead Cost Variances Thomas Textiles Corporation began November with a budget for 40,000 hours of production in the Weaving Department. The department has a full capacity of 53,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of November was as follows: Variable overhead $108,000 Fixed overhead 74,200 Total $182,200 The actual factory overhead was $184,400 for November. The actual fixed factory overhead was as budgeted. During November, the Weaving Department had standard hours at actual production volume of 42,000 hours. Determine the variable factory overhead controllable variance and the fixed factory overhead volume variance. 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.

Answer 1

a. Variable factory overhead controllable variance: $3,200 F

b. Fixed factory overhead volume variance: $3,710 F

Step-by-step explanation:

a)

Standard rate of variable overhead = (variable overhead)/(Production hours)

Standard rate of variable overhead = $108,000 / 40000 = $2.70 per hour

Standard hours for actual production = 42000 hours

Budgeted variable overhead for actual production = (standard hours of production* standard rate of variable overhead)

Budgeted variable overhead for actual production = 42000 * $2.70 = $113,400

Actual factory overhead = $184,400

Fixed overhead = $74,200

Actual variable overhead incurred = (Actual factory overhead) - (Fixed overhead)

Actual variable overhead incurred = $184,400 - $74,200 =$110,200

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

Variable factory overhead controllable variance = $113,400 - $110,200

Variable factory overhead controllable variance = $3,200 F

b)

Budgeted fixed overhead = $74,200

Predetermined fixed overhead rate = $74200 / 40000 = $1.855 per hour

Fixed overhead applied = Standard hours for actual production * Overhead rate = 42000 * $1.855 = $77,910

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

= $77910 - $74200= $3,710 F