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 8,400 hours. Variable costs: Indirect factory wages $30,240 Power and light 20,160 Indirect materials 16,800 Total variable cost $ 67,200 Fixed costs: Supervisory salaries Depreciation of plant and equipment $20,000 36,200 Insurance and property taxes 15,200 Total fixed cost 71,400 Total factory overhead cost $138,600 During May, the department operated at 8,860 standard hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.
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 8,400 hours. Variable costs: Indirect factory wages $30,240 Power and light 20,160 Indirect materials 16,800 Total variable cost $ 67,200 Fixed costs: Supervisory salaries Depreciation of plant and equipment $20,000 36,200 Insurance and property taxes 15,200 Total fixed cost 71,400 Total factory overhead cost $138,600 During May, the department operated at 8,860 standard hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter7: The Master Budget And Flexible Budgeting
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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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![TIGER EQUIPMENT INC.
Factory Overhead Cost Variance Report-Welding Department For the Month Ended May 31
Normal capacity for the month
8,400 hours
Actual production for the month
8,860 hours
Variances
Budget
Actual
Favorable
Unfavorable
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
Fixed costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
Total controllable variances
Net controllable variance-unfavorable
Volume variance-favorable:
Excess hours used over normal at the standard
rate for fixed factory overhead:
Total factory overhead cost variance-favorable](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0293f966-d428-4854-9c39-f6ab5fe6cfef%2F163e45c7-6473-4192-b1d4-55db1ce5d8e7%2F1gtydq9_processed.png&w=3840&q=75)
Transcribed Image Text:TIGER EQUIPMENT INC.
Factory Overhead Cost Variance Report-Welding Department For the Month Ended May 31
Normal capacity for the month
8,400 hours
Actual production for the month
8,860 hours
Variances
Budget
Actual
Favorable
Unfavorable
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
Fixed costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
Total controllable variances
Net controllable variance-unfavorable
Volume variance-favorable:
Excess hours used over normal at the standard
rate for fixed factory overhead:
Total factory overhead cost variance-favorable
![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 8,400
hours.
Variable costs:
Indirect factory wages
$30,240
Power and light
20,160
Indirect materials
16,800
Total variable cost
$ 67,200
Fixed costs:
Supervisory salaries
$20,000
Depreciation of plant and equipment
36,200
Insurance and property taxes
15,200
Total fixed cost
71,400
Total factory overhead cost
$138,600
During May, the department operated at 8,860 standard hours, and the factory overhead
costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect
materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment,
$36,200; and insurance and property taxes, $15,200.
Instructions
Prepare a factory overhead cost variance report for May. To be useful for cost control,
the budgeted amounts should be based on 8,860 hours.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0293f966-d428-4854-9c39-f6ab5fe6cfef%2F163e45c7-6473-4192-b1d4-55db1ce5d8e7%2Fle5hzda_processed.png&w=3840&q=75)
Transcribed Image Text: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 8,400
hours.
Variable costs:
Indirect factory wages
$30,240
Power and light
20,160
Indirect materials
16,800
Total variable cost
$ 67,200
Fixed costs:
Supervisory salaries
$20,000
Depreciation of plant and equipment
36,200
Insurance and property taxes
15,200
Total fixed cost
71,400
Total factory overhead cost
$138,600
During May, the department operated at 8,860 standard hours, and the factory overhead
costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect
materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment,
$36,200; and insurance and property taxes, $15,200.
Instructions
Prepare a factory overhead cost variance report for May. To be useful for cost control,
the budgeted amounts should be based on 8,860 hours.
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