Tiger equipment inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the welding department for may of the current year. the company expected to operate the department at 100% of normal capacity of 8,400 hours. variable costs: indirect factory wages $30,240 power and light 20,160 indirect materials 16,800 total variable cost $67,200 fixed costs: supervisory salaries $20,000 depreciation of plant and equipment 36,200 insurance and property taxes 15,200 total fixed cost 71,400 total factory overhead cost $138,600during may, the department operated at 8,860 hours, and the factory overhead costs incurred were indirect factory wages, $32,400; power and light, $21,000; indirect materials, $18,250; supervisory salaries, $20,000; depreciation of plant and equipment, $36,200; and insurance and property taxes, $15,200.required: prepare a factory overhead cost variance report for may. to be useful for cost control, the budgeted amounts should be based on 8,860 hours. enter a favorable variance as a negative number using a minus sign and an unfavorable variance as a positive number.

Manufacturing overhead spending variance= -110,927.2 favorable

Explanation:

Giving the following information:

The company expected to operate the department at 100% of the normal capacity of 8,400 hours.

Variable costs:

Indirect factory wages $30,240

Power and light 20,160

Indirect materials 16,800

Total variable cost $67,200

Fixed costs:

Supervisory salaries $20,000

Depreciation of plant and equipment 36,200

Insurance and property taxes 15,200

Total fixed cost 71,400

Total factory overhead cost $138,600

During May, the department operated at 8,860 hours, and the factory overhead costs incurred were:

indirect factory wages, $32,400

power and light, $21,000

indirect materials, $18,250

supervisory salaries, $20,000

depreciation of plant and equipment, $36,200

insurance and property taxes, $15,200.

Manufacturing overhead spending variance= (standard rate - actual rate)* actual quantity

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (67,200 + 138,600)/8400= 24.5 per hour

Actual overhead rate= 106150/8860= 11.98

Manufacturing overhead spending variance= (24.5 - 11.98)*8860= 110,927.2 favorable

answer; strategic planning;