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.

Transcribed Image Text:

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