Factory Overhead Cost Variance Report 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 $46,200 Power and light 10,500 Indirect materials 21,000 Total variable overhead cost $77,700 Fixed overhead costs: Supervisory salaries $56,430 Depreciation of plant and equipment 14,850 Insurance and property taxes 27,720 Total fixed overhead cost 99,000 Total factory overhead cost $176,700 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 $41,830 Power and light 9,570 Indirect materials 20,500 Total variable cost $71,900 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.
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 | $46,200 | |
| Power and light | 10,500 | |
| Indirect materials | 21,000 | |
| Total variable overhead cost | $77,700 | |
| Fixed overhead costs: | ||
| Supervisory salaries | $56,430 | |
| 14,850 | ||
| Insurance and property taxes | 27,720 | |
| Total fixed overhead cost | 99,000 | |
| Total factory overhead cost | $176,700 |
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 | $41,830 |
| Power and light | 9,570 |
| Indirect materials | 20,500 |
| Total variable cost | $71,900 |
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.
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