Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 22, Problem 22.4APR
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;
| 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.
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Chapter 22 Solutions
Financial & Managerial Accounting
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What is variance analysis?; Author: Corporate finance institute;https://www.youtube.com/watch?v=SMTa1lZu7Qw;License: Standard YouTube License, CC-BY