Question

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost andthe actual cost of factory overhead for the production of 5,000 units during May were as follows:Standard: 25,000 hours at $10 $250,000Actual: Variable factory overhead 202,500Fixed factory overhead 60,000What is the amount of the factory overhead controllable variance?a. $10,000 favorableb. $2,500 unfavorablec. $10,000 unfavorabled. $2,500 favorable

Answer 1

Answer:

b. $2,500 unfavorable

Explanation:

In the factory overhead controllable variance, only the variable cost is considered that means the fixed cost is not considered and hence, not taken in the computation part.

The computation of the factory overhead controllable variance is shown below:

= Standard factory overhead - variable factory overhead

= 25,000 hours × $8 - $202,500

= $200,000 - $202,500

= - $2,500 or unfavorable