1.
Concept Introduction:
Controllable variance: Controllable variance refers to the overhead variance that is under the manager’s control. It can be determined by subtracting the total actual
Volume Variance: Volume variance refers to the difference between the total budgeted overheads and the standards applied for overheads for actual units produced.
Controllable variance and its favorable or not.
2.
Concept Introduction:
Controllable variance: Controllable variance refers to the overhead variance that is under the manager’s control. It can be determined by subtracting the total actual overheads and total budgeted overheads for the actual units produced.
Volume Variance: Volume variance refers to the difference between the total budgeted overheads and the standards applied for overheads for actual units produced.
Volume variance.
3.
Concept Introduction:
Controllable variance: Controllable variance refers to the overhead variance that is under the manager’s control. It can be determined by subtracting the total actual overheads and total budgeted overheads for the actual units produced.
Volume Variance: Volume variance refers to the difference between the total budgeted overheads and the standards applied for overheads for actual units produced.
Overhead variance report.
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- Factory overhead cost variance report Tannin Products Inc. prepared the following factory overhead cost budget for the Trim Department for July of the current year, during which it expected to use 20,000 hours for production: Tannin has available 25,000 hours of monthly productive capacity in the Trim Department under normal business conditions. During July, the Trim Department actually used 22,000 hours for production. The actual fixed costs were as budgeted. The actual variable overhead for July was as follows: Construct a factory overhead cost variance report for the Trim Department for July.arrow_forwardCalculating amount of factory overhead applied to work in process The overhead application rate for a company is 2.50 per unit, made up of 1.00 for fixed overhead and 1.50 for variable overhead. Normal capacity is 10,000 units. In one month, there was an unfavorable flexible budget variance of 200. Actual overhead for the month was 27,000. What was the amount of the budgeted overhead for the actual level of production?arrow_forwardDetermining Budgeted Overhead The overhead application rate for a company is 10 per unit, made up of 6 per unit of fixed overhead and 4 per unit of variable overhead. Normal capacity is 10,000 units. In one month there was a favorable flexible budget variance of 2,500. Actual overhead for the month was 110,000 and actual units produced were 13,125. Based on this information, determine the amount of the budgeted overhead for the actual level of production.arrow_forward
- Factory overhead cost variance report Feeling Better Medical Inc., a manufacturer of disposable medical supplies, prepared the following factory overhead cost budget for the Assembly Department for October of the current year. The company expected to operate the department at 100% of normal capacity of 30,000 hours. During October, the department operated at 28,500 hours, and the factory overhead costs incurred were indirect factory wages, 234,000; power and light, 178,500; indirect materials, 50,600; supervisory salaries, 126,000; depreciation of plant and equipment, 70,000; and insurance and property taxes, 44,000. Instructions Prepare a factory overhead cost variance report for October. To be useful for cost control, the budgeted amounts should be based on 28,500 hours.arrow_forwardFactory 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. 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. 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.arrow_forwardCalculating factory overhead: two variances Monrovia Manufacturing Inc. normally produces 10,000 units of product A each month. Each unit requires 4 hours of direct labor, and factory overhead is applied on a direct labor hour basis. Fixed costs and variable costs in factory overhead at the normal capacity are 10 and 5 per unit, respectively. Cost and production data for June follow: a. Calculate the flexible-budget variance. b. Calculate the production-volume variance. c. Was the total factory overhead under- or overapplied? By what amount?arrow_forward
- Standard cost summary; materials and labor cost variances Perkins Processors Inc. produces an average of 10,000 units each month. The factory standards are 20,000 hours of direct labor and 10,000 pounds of materials for this volume. The standard cost of direct labor is 9.00 per hour, and the standard cost of materials is 4.00 per pound. The standard factory overhead at this level of production is 20,000. During the current month the production and cost reports reflected the following information: On the basis of this information: 1. Prepare a standard cost summary. 2. Calculate the materials (use the materials purchase price variance) and labor cost variances, and indicate whether they are favorable or unfavorable, using the formulas on pages 421422 and 424.arrow_forwardThomas Textiles Corporation began November with a budget for 60,000 hours of production in the Weaving Department. The department has a full capacity of 75,000 hours under normal business conditions. The budgeted overhead at the planned volumes at the beginning of November was as follows: The actual factory overhead was 725,000 for November. The actual fixed factory overhead was as budgeted. During November, the Weaving Department had standard hours at actual production volume of 64,500 hours. a. Determine the variable factory overhead controllable variance. b. Determine the fixed factory overhead volume variance.arrow_forwardCalculating factory overhead The standard capacity of a factory is 8,000 units per month. Cost and production data follow: Calculate the amount of factory overhead allowed for the actual volume of production each month and the variance between budgeted and actual overhead for each month.arrow_forward
- Flexible budget for factory overhead Presented below are the monthly factory overhead cost budget (at normal capacity of 5,000 units or 20,000 direct labor hours) and the production and cost data for a month. The predetermined overhead rate is based on normal capacity. Required: 1. Assuming that variable costs will vary in direct proportion to the change in volume, prepare a flexible budget for production levels of 80%, 90%, and 110% of normal capacity. Also determine the predetermined factory overhead rate at each level of volume in both units and direct labor hours. 2. Prepare a flexible budget for production levels of 80%, 90%, and 110%, assuming that variable costs will vary in direct proportion to the change in volume, but with the following exceptions. (Hint: Set up a third category for semi-variable expenses.) a. At 110% of capacity, another supervisor will be needed at a salary of 24,000 annually. b. At 80% of capacity, the repairs expense will drop to one-half of the amount at 100% capacity. c. At 80% of capacity, one part-time maintenance worker, earning 10,000 a year, will be laid off. d. At 110% of capacity, a machine not normally in use and on which no depreciation is normally recorded will be used in production. Its cost was 12,000, it has a 10-year life, and straight-line depreciation will be taken.arrow_forwardDirect materials and direct labor variance analysis Lenni Clothing Co. manufactures clothing in a small manufacturing facility. Manufacturing has 25 employees. Each employee presently provides 40 hours of productive labor per week. Information about a production week is as follows: Instructions Determine (A) the standard cost per unit for direct materials and direct labor; (B) the price variance, quantity variance, and total direct materials cost variance; and (C) the rate variance, time variance, and total direct labor cost variance.arrow_forwardAt the beginning of the year, Lopez Company had the following standard cost sheet for one of its chemical products: Lopez computes its overhead rates using practical volume, which is 80,000 units. The actual results for the year are as follows: (a) Units produced: 79,600; (b) Direct labor: 158,900 hours at 18.10; (c) FOH: 831,000; and (d) VOH: 112,400. Required: 1. Compute the variable overhead spending and efficiency variances. 2. Compute the fixed overhead spending and volume variances.arrow_forward
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