Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of 7,000 computers: Actual: Variable factory overhead Fixed factory overhead 7,000 hrs. at $30 Standard: If productive capacity of 100% was 11,000 hours and the factory overhead cost budgeted at the level of 7,000 standard hours was $227,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $4.25 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Variance Amount Favorable/Unfavorable Controllable variance Volume variance Total factory overhead cost variance: $174,800 46,750 210,000 Feedback $ Favorable ✓ Unfavorable Unfavorable ✓ ✓ ✓ Check My Work The variable factory overhead controllable variance is the difference between the actual variable overhead costs and the budgeted variable overhead for actual production. The fixed factory overhead volume variance is the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced. Learning Objective 4
Factory Overhead Cost Variances The following data relate to factory overhead cost for the production of 7,000 computers: Actual: Variable factory overhead Fixed factory overhead 7,000 hrs. at $30 Standard: If productive capacity of 100% was 11,000 hours and the factory overhead cost budgeted at the level of 7,000 standard hours was $227,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was $4.25 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Variance Amount Favorable/Unfavorable Controllable variance Volume variance Total factory overhead cost variance: $174,800 46,750 210,000 Feedback $ Favorable ✓ Unfavorable Unfavorable ✓ ✓ ✓ Check My Work The variable factory overhead controllable variance is the difference between the actual variable overhead costs and the budgeted variable overhead for actual production. The fixed factory overhead volume variance is the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced. Learning Objective 4
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 Variances
The following data relate to factory overhead cost for the production of 7,000 computers:
Actual:
Variable factory overhead
Fixed factory overhead
7,000 hrs. at $30
$174,800
46,750
210,000
If productive capacity of 100% was 11,000 hours and the factory overhead cost budgeted at the level of 7,000 standard hours was $227,000, determine the variable factory overhead Controllable Variance, fixed factory overhead volume variance,
and total factory overhead cost variance. The fixed factory overhead rate was $4.25 per hour. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.
Variance
Amount
Favorable/Unfavorable
Controllable variance
Standard:
Volume variance
Total factory overhead cost variance:
Feedback
$
$
$
Favorable
Unfavorable
Unfavorable
✓
Check My Work
The variable factory overhead controllable variance is the difference between the actual variable overhead costs and the budgeted variable overhead for actual production.
The fixed factory overhead volume variance is the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced.
Learning Objective 4
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