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 7,300 hours. Variable costs: Indirect factory wages $23,360 Power and light 13,724 Indirect materials 10,804 Total variable cost $47,888 Fixed costs: Supervisory salaries $14,610 Depreciation of plant and equipment 37,470 Insurance and property taxes 11,430 Total fixed cost 63,510 Total factory overhead cost $111,398 During May, the department operated at 7,700 standard hours. The factory overhead costs incurred were indirect factory wages, $24,890; power and light, $14,220; indirect materials, $11,600; supervisory salaries, $14,610; depreciation of plant and equipment, $37,470; and insurance and property taxes, $11,430. Required: Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,700 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. Tiger Equipment Inc. Factory Overhead Cost Variance Report—Welding Department For the Month Ended May 31 Normal capacity for the month 7,300 hrs. Actual production for the month 7,700 hrs. Actual Budget Unfavorable Variances Favorable Variances Variable costs: Indirect factory wages $fill in the blank $fill in the blank $fill in the blank $fill in the blank Power and light fill in the blank fill in the blank fill in the blank fill in the blank Indirect materials fill in the blank fill in the blank fill in the blank fill in the blank Total variable cost $fill in the blank $fill in the blank Fixed costs: Supervisory salaries $fill in the blank $fill in the blank Depreciation of plant and equipment fill in the blank fill in the blank Insurance and property taxes fill in the blank fill in the blank Total fixed cost $fill in the blank $fill in the blank Total factory overhead cost $fill in the blank $fill in the blank Total controllable variances $fill in the blank $fill in the blank fill in the blank $fill in the blank fill in the blank Excess hours used over normal at the standard rate for fixed factory overhead fill in the blank fill in the blank $fill in the blank
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.
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 7,300 hours.
Variable costs: | ||
Indirect factory wages | $23,360 | |
Power and light | 13,724 | |
Indirect materials | 10,804 | |
Total variable cost | $47,888 | |
Fixed costs: | ||
Supervisory salaries | $14,610 | |
Depreciation of plant and equipment | 37,470 | |
Insurance and property taxes | 11,430 | |
Total fixed cost | 63,510 | |
Total factory overhead cost | $111,398 |
During May, the department operated at 7,700 standard hours. The factory overhead costs incurred were indirect factory wages, $24,890; power and light, $14,220; indirect materials, $11,600; supervisory salaries, $14,610; depreciation of plant and equipment, $37,470; and insurance and property taxes, $11,430.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,700 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.
Tiger Equipment Inc.
Factory Overhead Cost Variance Report—Welding Department
For the Month Ended May 31
Normal capacity for the month 7,300 hrs. | ||||
Actual production for the month 7,700 hrs. | ||||
Actual | Unfavorable Variances | Favorable Variances | ||
Variable costs: | ||||
Indirect factory wages | $fill in the blank | $fill in the blank | $fill in the blank | $fill in the blank |
Power and light | fill in the blank | fill in the blank | fill in the blank | fill in the blank |
Indirect materials | fill in the blank | fill in the blank | fill in the blank | fill in the blank |
Total variable cost | $fill in the blank | $fill in the blank | ||
Fixed costs: | ||||
Supervisory salaries | $fill in the blank | $fill in the blank | ||
Depreciation of plant and equipment | fill in the blank | fill in the blank | ||
Insurance and property taxes | fill in the blank | fill in the blank | ||
Total fixed cost | $fill in the blank | $fill in the blank | ||
Total factory overhead cost | $fill in the blank | $fill in the blank | ||
Total controllable variances | $fill in the blank | $fill in the blank | ||
fill in the blank | $fill in the blank | |||
fill in the blank
|
||||
Excess hours used over normal at the standard rate for fixed factory overhead | fill in the blank | |||
fill in the blank
|
$fill in the blank |
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