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3 April, 04:40

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.

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Answers (1)
  1. 3 April, 04:47
    0
    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
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