eBook

Question Content Area

Factory Overhead Cost Variance Report

Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May of the current year. The company expected to operate the department at $100\%$ of normal capacity of $8,400$ hours.

Line Item Description Amount Amount

Variable costs:

Indirect factory wages $$30,240$

Power and light $20,160$

Indirect materials $16,800$

Total variable cost $$67,200$

Fixed costs:

Supervisory salaries $$20,000$

Depreciation of plant and equipment $36,200$

Insurance and property taxes $15,200$

Total fixed cost $71,400$

Total factory overhead cost $$138,600$

During May, the department operated at $8,860$ hours, and the factory overhead costs incurred were indirect factory wages, $$32,400$; power and light, $$21,000$; indirect materials, $$18,250$; supervisory salaries, $$20,000$; depreciation of plant and equipment, $$36,200$; and insurance and property taxes, $$15,200.$

Required:

Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on $8,860$ hours. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. If an amount box does not require an entry, leave it blank.

Normal capacity for the month $8,400$ hrs$.$

Actual production for the month $8,860$ hrs$.$

Tiger Equipment Inc.

Factory Overhead Cost Variance Report$-$Welding Department

For the Month Ended May $31$