Old Faithful Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for July 2006. The company expected

Question

48 users unlocked this solution today!

Old Faithful Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for July 2006. The company expected to operate the department at 100% of normal capacity of 5,000 hours.

During July, the department operated at 5,200 standard hours, and the factory overhead costs incurred were indirect factory wages, $15,000; power and light, $8,500; indirect materials, $9,450; supervisory salaries, $17,000; depreciation of plant and equipment, $41,250; and insurance and property taxes, $7,250.

Instructions
Prepare a factory overhead cost variance report for July. To be useful for cost control, the budgeted amounts should be based on 5,200hours.

Variable costs: Indirect factory wages Power and light Indirect materials $14,750 8,000 9,250 Total variable cost $32,000 Fixed costs: Supervisory salaries Depreciation of plant and equipment Insurance and property taxes $17,000 41,250 7,250 Total fixed cost 65,500 $97,500 Total factory overhead cost