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JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000. JoyT uses a standard costing system, and factory overhead is allocated to units produced using standard direct labor hours. The level of activity budgeted for this year was 10,000 direct labor hours, and JoyT used 10,300 actual direct labor hours. Based on the output accomplished during this year, 9,900 standard direct labor hours should have been used. Actual variable factory overhead was $596,000, and actual fixed factory overhead was $410,000 for the year. Based on this information, the variable factory overhead controllable variance for JoyT for this year was: a. $24,000 unfavorable. b. $2,000 unfavorable. c. $4,000 favorable. d. $22,000 favorable.

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 23, Problem 4CMA
Textbook Problem
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JoyT Company manufactures Maxi Dolls for sale in toy stores. In planning for this year, JoyT estimated variable factory overhead of $600,000 and fixed factory overhead of $400,000. JoyT uses a standard costing system, and factory overhead is allocated to units produced using standard direct labor hours. The level of activity budgeted for this year was 10,000 direct labor hours, and JoyT used 10,300 actual direct labor hours.

Based on the output accomplished during this year, 9,900 standard direct labor hours should have been used. Actual variable factory overhead was $596,000, and actual fixed factory overhead was $410,000 for the year. Based on this information, the variable factory overhead controllable variance for JoyT for this year was:

  1. a. $24,000 unfavorable.
  2. b. $2,000 unfavorable.
  3. c. $4,000 favorable.
  4. d. $22,000 favorable.

To determine

Compute the variable factory overhead controllable variance for Company J.

Explanation of Solution

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 )

Compute the variable factory overhead controllable variance for Company J:

Variable factory overheadcontrollable variance}(Actual variable factory overheadBudgeted variable factory overhead (2) )=$596,000$594,000=$2,000 Unfavorable

Working note (1):

Calculate the variable factory overhead:

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Chapter 23 Solutions

Financial And Managerial Accounting
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