The data related to Osage Sporting Goods Company’s factory overhead cost for the production of 60,000 units of product are as follows:
|
Actual: |
Variable factory overhead |
$274,500 |
|
|
Fixed factory overhead |
224,000 |
|
Standard: |
76,000 hours at $6.30 ($3.50 for variable factory overhead) |
478,800 |
Productive capacity at 100% of normal was 80,000 hours, and the factory overhead cost budgeted at the level of 76,000 standard hours was $490,000. Based upon these data, the chief cost accountant prepared the following variance analysis:
|
Variable factory overhead controllable variance: |
|
|
|
Actual variable factory overhead cost incurred |
$274,500 |
|
|
Budgeted variable factory overhead for 76,000 hours |
266,000 |
|
|
Variance—unfavorable |
|
$ 8,500 |
|
Fixed factory overhead volume variance: |
|
|
|
Normal productive capacity at 100% |
80,000 hours |
|
|
Standard for amount produced |
76,000 |
|
|
Productive capacity not used |
4,000 hours |
|
|
Standard variable factory overhead rate |
× $6.30 |
25,200 |
|
Variance—unfavorable |
|
|
|
Total factory overhead cost variance—unfavorable |
|
$33,700 |
Identify the errors in the factory overhead cost variance analysis.