Factory Overhead Cost Variance Report Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 7,500 hours. Variable costs: Indirect factory wages Power and light Indirect materials Total variable cost Fixed costs: $25,500 17,025 14,025 $56,550 Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead cost During May, the department operated at 8,000 standard hours. The factory overhead costs incurred were indirect factory wages, $27,470; power and light, $17,830; indirect materials, $15,300; supervisory salaries, $13,800; depreciation of plant and equipment, $35,400; and insurance and property taxes, $10,800. Required: $13,800 35,400 10,800 60,000 $116,550 Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,000 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.
Factory Overhead Cost Variance Report Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at 100% of normal capacity of 7,500 hours. Variable costs: Indirect factory wages Power and light Indirect materials Total variable cost Fixed costs: $25,500 17,025 14,025 $56,550 Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead cost During May, the department operated at 8,000 standard hours. The factory overhead costs incurred were indirect factory wages, $27,470; power and light, $17,830; indirect materials, $15,300; supervisory salaries, $13,800; depreciation of plant and equipment, $35,400; and insurance and property taxes, $10,800. Required: $13,800 35,400 10,800 60,000 $116,550 Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 8,000 hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest cent, if required. If an amount box does not require an entry, leave it blank.
Chapter1: Financial Statements And Business Decisions
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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.
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Transcribed Image Text:Factory Overhead Cost Variance Report
Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead
cost budget for the Welding Department for May of the current year. The company expected to operate
the department at 100% of normal capacity of 7,500 hours.
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
Fixed costs:
$25,500
17,025
14,025
$56,550
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
During May, the department operated at 8,000 standard hours. The factory overhead costs incurred were
indirect factory wages, $27,470; power and light, $17,830; indirect materials, $15,300; supervisory salaries,
$13,800; depreciation of plant and equipment, $35,400; and insurance and property taxes, $10,800.
Required:
$13,800
35,400
10,800
60,000
$116,550
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted
amounts should be based on 8,000 hours. Enter a favorable variance as a negative number using a minus
sign and an unfavorable variance as a positive number. Round your per unit computations to the nearest
cent, if required. If an amount box does not require an entry, leave it blank.
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