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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Factory overhead cost variances

 Blumen Textiles Corporation began April with a budget for 90,000 hours of production in the Weaving Department. The department has a full capacity of 100,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of April was as follows:

Variable overhead 5540,000
Fixed overhead 240,000
Total $780,000

 The actual factory overhead was $782,000 for April. The actual fixed factory overhead was as budgeted. During April, the Weaving Department had standard hours at actual production volume of 92,500 hours.

 a.    Determine the variable factory overhead controllable variance.

 b.    Determine the fixed factory overhead volume variance.

(a)

To determine

Variable factory overhead controllable variances:

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:

Variable factory overheadcontrollable variance}(Actual variable factory overheadStandard variable factory overhead )

Fixed factory overhead volume variances:

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)

To determine: The variable factory overhead controllable variance.

Explanation

The variable factory overhead controllable variance is determined as follows:

Variable factory overheadcontrollable variance}(Actual variable factory overhead (1)Standard variable factory overhead (2) )=$542,000$555,000=$(13,000)

Working notes:

Determine the actual variable factory overhead:

Actual variablefactory overhead}=[Actual factory overheadFixed overhead]=$782,000$240,000=$542,000

<

(b)

To determine
The fixed factory overhead volume variance.

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