Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012. The company expected to operate the department at 100% of normal capacity of 7,000 hours.
Variable Costs:
Indirect factory wages $22,050
Power and light 12,600
Indirect Materials 10,500
Total Variable Cost $45,150
Fixed Costs:
Supervisory salaries $12,000
Depreciation of plant and equipment 31,450
Insurance and property taxes 9,750
Total fixed costs $53,200
Total factory overhead $98,350
During May, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $23,580; power and light, $13,120; indirect materials, $11,310; supervisory salaries, $12,000; depreciation of plant and equipment, $31,450; and insurance and property taxes, $9,750.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,400 hours.
Click here for the solution: Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012
