Construct a factory overhead cost variance report for the Trim Department for July.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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 14,000 hours for production:
| Variable overhead costs: | ||
| Indirect factory labor | $39,200 | |
| Power and light | 10,080 | |
| Indirect materials | 15,400 | |
| Total variable overhead cost | $64,680 | |
| Fixed overhead costs: | ||
| Supervisory salaries | $50,270 | |
| 13,230 | ||
| Insurance and property taxes | 24,700 | |
| Total fixed overhead cost | 88,200 | |
| Total factory overhead cost | $152,880 |
Tannin has available 18,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 13,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:
| Actual variable factory overhead costs: | |
| Indirect factory labor | $35,490 |
| Power and light | 9,190 |
| Indirect materials | 15,000 |
| Total variable cost | $59,680 |
Construct a factory overhead cost variance report for the Trim Department for July. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If an amount box does not require an entry, leave it blank. Round your interim computations to the nearest cent, if required.
| Tannin Products Inc. | ||||
| Factory Overhead Cost Variance Report-Trim Department | ||||
| For the Month Ended July 31 | ||||
| Productive capacity for the month 18,000 hrs. | ||||
| Actual productive capacity used for the month 13,000 hrs. | ||||
| Actual Cost | Budget (at Actual Production) |
Unfavorable Variances |
(Favorable) Variances |
|
| Variable factory overhead costs: | ||||
| Indirect factory labor | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 | $fill in the blank 4 |
| Power and light | fill in the blank 5 | fill in the blank 6 | fill in the blank 7 | fill in the blank 8 |
| Indirect materials | fill in the blank 9 | fill in the blank 10 | fill in the blank 11 | fill in the blank 12 |
| Total variable factory overhead cost | $fill in the blank 13 | $fill in the blank 14 | ||
| Fixed factory overhead costs: | ||||
| Supervisory salaries | $fill in the blank 15 | $fill in the blank 16 | ||
| Depreciation of plant and equipment | fill in the blank 17 | fill in the blank 18 | ||
| Insurance and property taxes | fill in the blank 19 | fill in the blank 20 | ||
| Total fixed factory overhead cost | $fill in the blank 21 | $fill in the blank 22 | ||
| Total factory overhead cost | $fill in the blank 23 | $fill in the blank 24 | ||
| Total controllable variances | $fill in the blank 25 | $fill in the blank 26 | ||
| $fill in the blank 28 | ||||
| Volume variance-unfavorable: | ||||
| Idle hours at the standard rate for fixed factory overhead | fill in the blank 29 | |||
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