Chapter 22, Problem 22.4APR

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.

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.

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

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.