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.
Determine the variable factory overhead controllable variance and the fixed factory overhead volume variance. Enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number. Round your interim computations to the nearest cent, if required.
a. Variable factory overhead controllable variance: $
b. Fixed factory overhead volume variance: $

Answer 1

Answer:

a) $12,500 unfavorable

b) 0

Explanation:

variable factory overhead controllable variance = actual variable overhead expense - (standard variable overhead per unit x standard number of units)

actual variable overhead expense = $725,000

standard variable overhead per unit = $712,500 / 60,000 = $11.875

standard number of units = 60,000

variable factory overhead controllable variance = $725,000 - $712,500 = $12,500 unfavorable

Controllable factory overhead is not related to any changes in the actual volume or quantity produced.

Fixed factory overhead volume variance = actual fixed overhead - standard fixed overhead = $262,500 - $262,500 = 0

Fixed overhead was exactly the same as the standard or budgeted overhead.