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
