Factory overhead cost and production data for a firm for a year were as follows:

Actual

Variable cost- $90,000

Fixed cost- $205,000

Machine Hours- 20,000

Budget

Variable cost-$95,000

Fixed cost- $190,000

Machine Hours- 19,000

Factory overhead is recovered from production using machine hours as the cost driver.

Task 4

a.Calculate the factory overhead recovery rate.

b.Determine the amount of over or under-applied overhead. Your answer must clearly state whether the calculated amount is over or under-applied.

c.Analyse over/under applied overhead into a spending variance and a capacity variance.