Tiger Equipment Inc., a manufacturer of construction equipment, prepared the fol
ID: 2528361 • Letter: T
Question
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 8,700 hours.
TIGER EQUIPMENT INC.
Factory Overhead Cost Budget—Welding Department
For the Month Ended May 31
1
Variable costs:
2
Indirect factory wages
$44,370.00
3
Power and light
21,750.00
4
Indirect materials
17,400.00
5
Total variable cost
$83,520.00
6
Fixed costs:
7
Supervisory salaries
$19,200.00
8
Depreciation of plant and equipment
35,200.00
9
Insurance and property taxes
19,550.00
10
Total fixed cost
73,950.00
11
Total factory overhead cost
$157,470.00
During May, the department operated at 9,120 standard hours, and the factory overhead costs incurred were indirect factory wages, $47,092; power and light, $22,500; indirect materials, $18,850; supervisory salaries, $19,200; depreciation of plant and equipment, $35,200; and insurance and property taxes, $19,550.
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 9,120 hours. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all variances as positive amounts.
TIGER EQUIPMENT INC.
Factory Overhead Cost Budget—Welding Department
For the Month Ended May 31
Explanation / Answer
Answer
Variable costs:
Total
per hour [total/8700]
Indirect factory wages
$ 44,370.00
$ 5.10
Power and light
$ 21,750.00
$ 2.50
Indirect materials
$ 17,400.00
$ 2.00
Total variable cost
$ 83,520.00
$ 9.60
TIGER EQUIPMENT INC.
Factory Overhead Cost Budget—Welding Department
For the Month Ended May 31
1
Variable costs:
Flexible Budget data For 9120 hours
Actual data for 9120 hours
Variances
2
Indirect factory wages
$ 46,512.00
$ 47,092.00
$ 580.00
Unfavourable
3
Power and light
$ 22,800.00
$ 22,500.00
$ 300.00
Favourable
4
Indirect materials
$ 18,240.00
$ 18,850.00
$ 610.00
Unfavourable
5
Total variable cost
$ 87,552.00
$ 88,442.00
$ 890.00
Unfavourable
6
Fixed costs:
$ -
None/ Favourable
7
Supervisory salaries
$ 19,200.00
$ 19,200.00
$ -
None/ Favourable
8
Depreciation of plant and equipment
$ 35,200.00
$ 35,200.00
$ -
None/ Favourable
9
Insurance and property taxes
$ 19,550.00
$ 19,550.00
$ -
None/ Favourable
10
Total fixed cost
$ 73,950.00
$ 73,950.00
$ -
None/ Favourable
11
Total factory overhead cost
$ 1,61,502.00
$ 1,62,392.00
$ 890.00
Unfavourable
Variable costs:
Total
per hour [total/8700]
Indirect factory wages
$ 44,370.00
$ 5.10
Power and light
$ 21,750.00
$ 2.50
Indirect materials
$ 17,400.00
$ 2.00
Total variable cost
$ 83,520.00
$ 9.60