Question

The following data relate to factory overhead cost for the production of 10,000 computers:

Actual: Variable factory overhead $262,000
Fixed factory overhead 90,000
Standard: 14,000 hrs. at $25 350,000
If productive capacity of 100% was 15,000 hours and the total factory overhead cost budgeted at the level of 14,000 standard hours was $356,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $6.00 per hour.

Answer 1

1.-4,000 Favorable

2.6,000 Unfavorable

3.$2,000 Unfavorable

Step-by-step explanation:

1.Preparation to determine variable factory overhead Controllable variance

Using this formula

Variable factory overhead Controllable variance=Standard hours * rate- Fixed factory overhead rate

Let plug in the formula

Variable factory overhead Controllable variance=14,000 * 25.00- 6.00= 266,000

Variable factory overhead Controllable variance = 262,000- 266,000

Variable factory overhead Controllable variance= -4,000 Favorable

2. Preparation to determine fixed factory overhead volume variance .

First step is to deduct Productive capacity hours from total factory overhead cost standard hours

15,000 hours -14,000 hours =1,000 hrs

Second step is to find the fixed factory overhead volume variance

Using this formula

Fixed factory overhead volume variance=Un-used Numbers of hrs*Fixed factory overhead rate

Let plug in the formula

Fixed factory overhead volume variance=1,000 hrs*$6.00

Fixed factory overhead volume variance= 6,000 Unfavorable

3. Preparation to Determine total factory overhead cost variance

Variable Factory Overhead Controllable Variance $4,000 Favorable

Fixed Factory Overhead Volume Variance $6,000 Unfavorable

Factory Overhead Cost Variance$2,000 Unfavorable