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 Power and light Indirect materials Total variable cost $30,240 20,160 16,800 $67,200 Fixed costs: Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead cost. During May, the department operated at 8,860 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. $20,000 36,200 15,200 71,400 $138,600 Required: 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. 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. Normal capacity for the month 8,400 hrs.
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 Power and light Indirect materials Total variable cost $30,240 20,160 16,800 $67,200 Fixed costs: Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead cost. During May, the department operated at 8,860 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. $20,000 36,200 15,200 71,400 $138,600 Required: 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. 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. Normal capacity for the month 8,400 hrs.
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:Line Item Description
Variable factory overhead costs:
Indirect factory wages
Power and light
Indirect materials
Tiger Equipment Inc.
Factory Overhead Cost Variance Report-Welding Department
For the Month Ended May 31
Total variable cost
Fixed factory overhead costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
Total controllable variances
Volume variance-favorable:
Excess hours used over normal at the standard rate for fixed factory overhead
$
Actual
Cost
XX
Budget
(at Actual
Production)
Unfavorable Favorable
Variances Variances
JUC DUQ
00
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 8,400 hours.
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
$30,240
20,160
16,800
Fixed costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
71,400
$138,600
Total factory overhead cost
During May, the department operated at 8,860 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.
Normal capacity for the month 8,400 hrs.
Actual production for the month 8,860 hrs.
$67,200
$20,000
36,200
15,200
Required:
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. 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.
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