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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Factory overhead cost variance report

Topeka Plastics Inc. prepared the following factory overhead cost budget for the Trim Department for July, during which it expected to use 25.000 hours for production:

Topeka Plastics has 30,000 hours of monthly productive capacity available in the Trim Department under normal business conditions. During July, the Trim Department actually used 28,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:

Construct a factory overhead cost variance report for the Trim Department for July.

To determine

Concept Introduction:

The variable factory overhead controlled variance is difference between the budgeted and actual variable factory overhead.

The fixed factory overhead volume variance is the difference between the standard fixed factory overhead at actual production and at 100% of normal capacity.

The sum of variable overhead controlled variance and fixed factory overhead volume variance is the factory overhead cost variance.

To Prepare:

A factory overhead cost variance report of trim department for the month of July.

Explanation
    Factory overhead cost variance report
    Productive capacity for the month of ( 100% normal) 30,000hours
    Actual production for the month 28,000hours
    ParticularsBudgeted (at actual production)ActualVariance
    FavorableUnfavorable
    Variable factory overhead cost:
    Indirect factory Wages (W.N. 1)$22,400$23,250$850
    Power and light (W.N. 2)$20,160$20,000$160
    Indirect Material (W.N. 3)$10,080$11,100$1,020
    Total variable factory overhead cost$52,640$54,350
    Fixed factory overhead costs:
    Supervisory salaries$50,000$50,000
    Depreciation on plant and equipment$33,100$33,100
    Insurance and property taxes$11,400$11,400
    Total fixed factory overhead costs$94,500$94,500
    Total factory overhead cost$147,

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