Reference no: EM132032400
Question - Power equipment inc, a manufacturer of construction equipment, prepared the following factory overhead cost budget for the welding department for july 2008. the company expected to perate the department at 100% of normal capacity of 4,800 hours
Variable cost
Indirect factory wages $14,160
Power and light 7,680
Indirect materials 8,880
Total variable costs $30,720
Fixed costs
Supervisory salaries $16,000
Depreciation of plant and equipment 43,500
Insurance and property taxes 6,740
Total fixed costs 66,240
Total factory overhead cost $96,960
During July, the department operate at 5,000 standard hours, and the factory overhead costs incurred were indirect factory wages, $14,000 power and light, $9250 indirect materials, $8450 supervisory salaries $16,000 deprecation of plant and equipment 43,500 and insurance and property taxes 6,740.
Prepare a factory overhead cost variance report for July. To be use for cost control, the budgeted amounts should be based on 5,000 hours.