Construct a factory overhead cost variance report for the Trim Department for July. Enter a favorable variance as a negative amount, and an unfavorable variance
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Topeka Plastics Inc. prepared the following factory overhead cost budget for the Trim Department for July, during which it expected to use 13,000 hours for production:
| Variable overhead cost: | ||
| Indirect factory labor | $39,000 | |
| Power and light | 10,010 | |
| Indirect materials | 22,100 | |
| Total variable cost | $ 71,110 | |
| Fixed overhead cost: | ||
| Supervisory salaries | $54,260 | |
| Depreciation of plant and equipment | 14,280 | |
| Insurance and property taxes | 26,660 | |
| Total fixed cost | 95,200 | |
| Total factory overhead cost | $166,310 |
Topeka Plastics has available 17,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 12,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows:
| Actual variable factory overhead cost: | |
| Indirect factory labor | $35,100 |
| Power and light | 9,070 |
| Indirect materials | 21,400 |
| Total variable cost | $65,570 |
Construct a factory overhead cost variance report for the Trim Department for July. Enter a favorable variance as a negative amount, and an unfavorable variance as a positive amount. If an answer box does not require an entry, leave it blank or enter zero "0".
| Topeka Plastics Inc. | ||||
| Factory Overhead Cost Variance Report-Trim Department | ||||
| For the Month Ended July 31 | ||||
| Productive capacity for the month: | 17,000 hrs | |||
| Actual productive capacity used for the month: | 12,000 hrs | |||
| Budget (at actual production) | Actual | Favorable Variances | Unfavorable Variances | |
| Variable factory overhead costs: | ||||
| Indirect factory labor | $fill in the blank 1 | $fill in the blank 2 | $fill in the blank 3 | $fill in the blank 4 |
| Power and light | fill in the blank 5 | fill in the blank 6 | fill in the blank 7 | fill in the blank 8 |
| Indirect materials | fill in the blank 9 | fill in the blank 10 | fill in the blank 11 | fill in the blank 12 |
| Total variable factory overhead cost | $fill in the blank 13 | $fill in the blank 14 | ||
| Fixed factory overhead costs: | ||||
| Supervisory salaries | $fill in the blank 15 | $fill in the blank 16 | fill in the blank 17 | fill in the blank 18 |
| Depreciation of plant and equipment | fill in the blank 19 | fill in the blank 20 | fill in the blank 21 | fill in the blank 22 |
| Insurance and property taxes | fill in the blank 23 | fill in the blank 24 | fill in the blank 25 | fill in the blank 26 |
| Total fixed factory overhead cost | $fill in the blank 27 | $fill in the blank 28 | fill in the blank 29 | fill in the blank 30 |
| Total factory overhead cost | $fill in the blank 31 | $fill in the blank 32 | fill in the blank 33 | fill in the blank 34 |
| Total controllable variances | $fill in the blank 35 | $fill in the blank 36 | ||
| $fill in the blank 38 | ||||
| Idle hours at the standard rate for fixed factory overhead | fill in the blank 40 | |||
| $fill in the blank 42 |
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