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 7,800 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 standard 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.

Tiger Equipment Inc.

Welding Department

Factory Overhead Cost Variance Report for May:

                                                                  Budget

                                                         Normal      Flexible    Actual  Variance

Capacity (hours) =                             7,800         8,860      8,860       0

Variable costs:

Indirect factory wages                     $30,240   $34,350   $32,400   $1,950 F

Power and light                                  20,160      22,900     21,000      1,900 F

Indirect materials                               16,800        19,083     18,250        833 F

Total variable cost                          $67,200     $76,333   $71,650  $4,683 F

Fixed costs:

Supervisory salaries                       $20,000   $20,000   $20,000     $0

Depreciation of plant & equipment 36,200     36,200      36,200       0

Insurance and property taxes          15,200      15,200       15,200       0

Total fixed cost                                  71,400      71,400      $71,400     $0

Total factory overhead cost        $138,600  $147,733   $143,050   $4,683 F

Explanation:

a) Data and Calculations:

                                                         Normal    

Capacity =                                       7,800 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 & equipment 36,200

Insurance and property taxes          15,200

Total fixed cost                                  71,400

Total factory overhead cost        $138,600

Flexible costs:

Indirect factory wages       $30,240 /7,800 * 8,860 = $34,350

Power and light                     20,160 /7,800 * 8,860 = $ 22,900

Indirect materials                  16,800  /7,800 * 8,860 = $19,083

                                                                  Budget

                                                         Normal      Flexible    Actual  Variance

Capacity (hours) =                             7,800         8,860      8,860       0

Variable costs:

Indirect factory wages                     $30,240   $34,350   $32,400   $1,950 F

Power and light                                  20,160      22,900     21,000      1,900 F

Indirect materials                               16,800        19,083     18,250        833 F

Total variable cost                          $67,200     $76,333   $71,650  $4,683 F

Fixed costs:

Supervisory salaries                       $20,000   $20,000   $20,000     $0

Depreciation of plant & equipment 36,200     36,200      36,200       0

Insurance and property taxes          15,200      15,200       15,200       0

Total fixed cost                                  71,400      71,400      $71,400     $0

Total factory overhead cost        $138,600  $147,733   $143,050   $4,683 F

answer; (d) i believe that the correct answer is ; /// a new invention lowers the cost of production;

the definition of a small business is an independently owned and operated company that is limited in size and in revenue depending on the industry. a local bakery that employs 10 people is an example of a small business. a manufacturing facility that employees less than 500 people is an example of a small business.