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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

a. Describe the two variances between the actual costs and the standard costs for factory overhead.

b. What is a factory overhead cost variance report?

(a)

To determine

Factory overhead cost variance:

The difference between the variable factory overhead controllable variances and the fixed factory overhead volume variances is known as factory overhead cost variance. It can be computed as follows:

Factory overhead cost variance} = (Variable factory overhead controllable variancesFixed factory overhead volume variances)

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 describe: The two variances between the actual costs and the standard costs for the factory overheads.

Explanation

  • In the variable factory overhead controllable variance, the total amount of overhead cost would be earned by deducting the actual variable factory overhead from the standard variable factory overhead.
  • The fixed factory overhead volume variances is normally, the difference b...

(b)

To determine
The factory overhead cost variance report.

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