Question

Thomas 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:
Variable overhead $450,000
Fixed overhead 262,500
Total $712,500

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.
Required:
a. Determine the variable factory overhead controllable variance.
b. Determine the fixed factory overhead volume variance.

Answer 1

Answer:

For (a) $21250 favorable (b) $21300 Unfavorable

Explanation:

Solution:

Now,

(a) The Standard rate of variable overhead = $450000/60000 = $7.50 per hour

so,

The Variable factory overhead controllable variance = Actual variable overhead costs - Standard variable overhead costs

Gives,

= (725000-262500)-(64500*7.50) = $21250 favorable

(b) The fixed factory overhead volume variance = Budgeted overhead - standard overhead

= 262500 - 262500*64500/60000

Therefore,

= $21300 Unfavorable