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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Problem 23-4A
TIGER EQUIPMENT INC.
Factory Overhead Cost Variance Report-Welding Department For the Month Ended May 31
Normal capacity for the month
8,400 hours
Actual production for the month
8,860 hours
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
Fixed costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
Total controllable variances
Net controllable variance-unfavorable
Volume variance-favorable:
Excess hours used over normal at the standard
rate for fixed factory overhead:
Total factory overhead cost variance-favorable
Budget
Actual
Variances
Favorable Unfavorable

Transcribed Image Text:PR 23-4A Factory overhead cost variance report
OBJ. 4
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.
Variable costs:
Indirect factory wages
Power and light
Indirect materials
Total variable cost
Fixed costs:
Supervisory salaries
Depreciation of plant and equipment
Insurance and property taxes
Total fixed cost
Total factory overhead cost
$30,240
20,160
16,800
$20,000
36,200
15,200
$ 67,200
71,400
$138,600
During May, the department operated at 8,860 standard 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.
Instructions
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.
Warren, C. S., Jonick, C. A., & Schneider, J. S., (2021). Accounting (28 ed.). Boston, MA: Cengage.
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