The following data relate to factory overhead cost for the production of 10,000 computers:

The 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.

Answer:






Variable factory overhead controllable variance: 
Actual variable factory overhead cost incurred………………   $262,000 
Budgeted variable factory overhead for 14,000 hrs. 
[14,000 × ($25.00 – $6.00)]……………………………………   266,000 
Variance—favorable………………………………………… $(4,000) 
Fixed factory overhead volume variance: 
Productive capacity at 100%…………………………………… 15,000 
Standard for amount produced………………………………… 14,000 hrs. 
Productive capacity not used………………………………… 1,000 hrs. 
× Standard fixed factory overhead rate……………………… 
Variance—unfavorable……………………………………… 
Total factory overhead cost variance—unfavorable*……………   $ 2,000 
* Actual Overhead – Applied Overhead = Total Overhead Variance:    
($262,000 + $90,000) – $350,000 = $2,000 

Alternative Computation of Overhead Variances 
Factory Overhead 
Actual costs 352,000 Applied costs 350,000 
Balance (underapplied)     2,000   
Budgeted Factory 
Overhead for Amount 
Produced 
$352,000 Variable cost [14,000 × ($25.00 – $6.00)]………   $266,000 $350,000 
Fixed cost…………………………………………     90,000 
Total………………………………………………… $356,000 
–$4,000 F $6,000 U 
Controllable  Volume 
Variance Variance 
$2,000 U 
Total Factory Overhead 
Cost Variance