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 5,500 hours. Variable costs: Indirect factory wages Power and light Indirect materials Total variable cost Fixed costs: $18,700 10,340 8,690 $37,730 Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead cost During May, the department operated at 5,800 standard hours. The factory overhead costs incurred were indirect factory wages, $19,920; power and light, $10,710; indirect materials, $9,300; supervisory salaries, $9,610; depreciation of plant and equipment, $24,660; and insurance and property taxes, $7,530. Required: $9,610 24,660 7,530 41,800 $79,530 Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 5,800 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., 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 5,500 hours. Variable costs: Indirect factory wages Power and light Indirect materials Total variable cost Fixed costs: $18,700 10,340 8,690 $37,730 Supervisory salaries Depreciation of plant and equipment Insurance and property taxes Total fixed cost Total factory overhead cost During May, the department operated at 5,800 standard hours. The factory overhead costs incurred were indirect factory wages, $19,920; power and light, $10,710; indirect materials, $9,300; supervisory salaries, $9,610; depreciation of plant and equipment, $24,660; and insurance and property taxes, $7,530. Required: $9,610 24,660 7,530 41,800 $79,530 Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 5,800 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
Section: Chapter Questions
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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: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 5,500 hours.
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
$18,700
10,340
8,690
$9,610
24,660
7,530
$37,730
41,800
$79,530
Total factory overhead cost
During May, the department operated at 5,800 standard hours. The factory overhead costs incurred were indirect factory wages, $19,920; power and light, $10,710; indirect materials, $9,300;
supervisory salaries, $9,610; depreciation of plant and equipment, $24,660; and insurance and property taxes, $7,530.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 5,800 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.
Transcribed Image Text:Normal capacity for the month 5,500 hrs.
Actual production for the month 5,800 hrs.
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
Tiger Equipment Inc.
Factory Overhead Cost Variance Report-Welding Department
For the Month Ended May 31
Excess hours used over normal at the standard rate for fixed factory overhead
$
Actual Budget Unfavorable Variances Favorable Variances
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