Compute the following to assist you in identifying the errors in the factory overhead cost variance analysis
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.
Factory
The data related to Shunda Enterprises Inc.’s
| Actual: | Variable factory overhead | $86,100 |
| Fixed factory overhead | 62,100 | |
| Standard: | 30,000 hrs. at $5 ($2.90 for variable factory overhead) | 150,000 |
Productive capacity at 100% of normal was 29,200 hours, and the factory overhead cost budgeted at the level of 30,000 standard hours was $149,100. Based on these data, the chief cost accountant prepared the following
| Variable factory overhead controllable variance: | |||
| Actual variable factory overhead cost incurred | $86,100 | ||
| Budgeted variable factory overhead for 30,000 hours | 87,000 | ||
| Variance—favorable | $(900) | ||
| Fixed factory overhead volume variance: | |||
| Normal productive capacity at 100% | 29,200 | hrs. | |
| Standard for amount produced | 30,000 | ||
| Productive capacity not used | 800 | hrs. | |
| Standard variable factory overhead rate | x $5 | ||
| Variance—unfavorable | 4,000 | ||
| Total factory overhead cost variance—unfavorable | $3,100 |
Compute the following to assist you in identifying the errors in the factory overhead cost variance analysis. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.
| Variance | Amount | Favorable/Unfavorable |
| Variable Factory Overhead Controllable Variance | $ | Favorable |
| Fixed Factory Overhead Volume Variance | $ | Favorable |
| Total Factory Overhead Cost Variance | $ | Favorable |
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