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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

Standard factory overhead variance report
Seabury. Inc.. a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October. The company expected to operate the department at 100% of normal capacity of 25.000 hours.

During October, the department operated at 23,500 hours, and the factory overhead costs incurred were as follows: indirect factory wages, $140,500; power and light. $28,600; indirect materials, $15,220; supervisor)' salaries, $125,000; depreciation of plant and equipment, $49,000; and insurance and property taxes, $29,750.

Instructions

Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be- based on 23.500 hours.

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:

The factory overhead cost variance report.

Explanation
    Seabury Inc
    For the month of October
    Productive capacity for the month of ( 100% normal) 25,000hours
    Actual production for the month 23,500hours
    ParticularsBudgeted (at actual production)ActualVariance
    FavorableUnfavorable
    Variable factory overhead cost:
    Indirect factory labor (W.N. 1)$141,000$140,500$500
    Power and light ((W.N. 2)$27,730$28,600$870
    Indirect Material ((W.N. 3)$15,980$15,220$760
    Total variable factory overhead cost$184,710$184,320
    Fixed factory overhead costs:
    Supervisory salaries$125,000$125,000
    Depreciation$49,000$49,000
    Insurance and prop

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