Tiger Equipment Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2012. The company expected to operate the department at 100% of normal capacity of 7,000 hours.
|
Variable Costs: |
|
|
Indirect factory wages |
$22,050 |
|
Power and light |
12,600 |
|
Indirect Materials |
10,500 |
|
Total Variable Cost |
$45,150 |
|
Fixed Costs: |
|
|
Supervisory salaries |
$12,000 |
|
Depreciation of plant and equipment |
31,450 |
|
Insurance and property taxes |
9,750 |
|
Total fixed costs |
$53,200 |
|
Total factory overhead |
$98,350 |
During May, the department operated at 7,400 standard hours, and the factory overhead costs incurred were indirect factory wages, $23,580; power and light, $13,120; indirect materials, $11,310; supervisory salaries, $12,000; depreciation of plant and equipment, $31,450; and insurance and property taxes, $9,750.
Required:
Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 7,400 hours.