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 operate the department at 100% of normal capacity of 4,800 hours.
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Variable costs: |
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Indirect factory wages |
$14,160 |
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Power and light |
7,680 |
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Indirect materials |
8,880 |
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Total variable cost |
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$30,720 |
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Fixed costs: |
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Supervisory salaries |
$16,000 |
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Depreciation of plant and equipment |
43,500 |
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Insurance and property taxes |
6,740 |
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Total fixed cost |
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66,240 |
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Total factory overhead cost |
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$96,960 |
During July, the department operated at 5,000 standard hours, and the factory overhead costs incurred were indirect factory wages, $14,000; power and light, $9,250; indirect materials, $8,450; supervisory salaries, $16,000; depreciation of plant and equipment, $43,500; and insurance and property taxes, $6,740.
Instructions
Prepare a factory overhead cost variance report for July. To be useful for cost control, the budgeted amounts should be based on 5,000 hours.