Chapter 22, Problem 22.17EX

### Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307

Chapter
Section

### Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
ISBN: 9781285866307
Textbook Problem

# Factory overhead cost variancesThe following data relate to factory overhead cost for the production of 10,000 computers: Actual: Variable factory overhead $262,000 Fixed factory overhead 90,000 Standard: 14,000 hrs. at$25 350,000 If productive capacity of 100% was 15,000 hours and the total factory overhead cost budgeted at the level of 14,000 standard hours was $356,000, determine the variable factory overhead controllable variance, fixed factory overhead volume variance, and total factory overhead cost variance. The fixed factory overhead rate was$6.00 per hour.

To determine

The difference between the actual variable overhead costs and the standard overhead for actual production is known as the variable factory overhead controllable variances. The variable factory overhead controllable variance is computed as follows:

Factory overhead volume variances refers to the difference between the budgeted fixed overheads at 100% of normal capacity, and the standard fixed overheads for the actual units produced. The factory overhead volume variances can be calculated as follows:

Fixed factory overheadvolume variance}(Standard hours for 100% ofnormal capacityStandardhours for actual units produced)×(Fixed factory overhead rate)

The variable factory overhead controllable variance.

Explanation

The variable factory overhead controllable variance is $(4,000) and it is a favorablevariance. Working Notes: Determine the variable factory overhead controllable variance. VariableÂ factoryÂ overheadcontrollableÂ variance}=Â (ActualÂ variableÂ factoryÂ overheadâˆ’StandardÂ variableÂ factoryÂ overheadÂ (2)Â )=$262,000âˆ’$266,000=$(4,000) (1)

Determine the standard variable factory overhead.

To determine

The fixed factory overhead volume variance.

To determine

The total factory overhead cost variance.

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