Factory Overhead Variance Corrections The data related to Shunda Enterprises Inc.'s factory overhead cost for the production of 100,000 units of product are as follows:
Actual: Variable factory overhead $458,000
Fixed factory overhead 494,000
Standard: 132,000 hrs. at $7.30 ($3.50 for variable factory overhead) 963,600
Productive capacity at 100% of normal was 130,000 hours, and the factory overhead cost budgeted at the level of 132,000 standard hours was $956,000. Based on these data, the chief cost accountant prepared the following variance analysis:
Variable factory overhead controllable variance:
Actual variable factory overhead cost incurred $458,000
Budgeted variable factory overhead for 132,000 hours 462,000
Variance—favorable –$ 4,000
Fixed factory overhead volume variance:
Normal productive capacity at 100% 130,000 hrs.
Standard for amount produced 132,000
Productive capacity not used 2,000 hrs.
Standard variable factory overhead rate x $7.30
Variance—unfavorable 14,600
Total factory overhead cost variance—unfavorable $10,600
Compute the following to assist you in identifying the errors in the factory overhead cost variance analysis. 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.
Variance Amount Favorable/Unfavorable
Variable Factory Overhead Controllable Variance $
Fixed Factory Overhead Volume Variance $
Total Factory Overhead Cost Variance $