The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours.The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows: $$\begin{array} { l l r }
\text { Actual: } & \text { Variable factory overhead } & \$ 360,000 \
& \text { Fixed factory overhead } & 104,000 \
\text { Standard: } & 60,000 \text { hours at } \$ 7.50 & 450,000
\end{array}$$ ? What is the amount of the variable factory overhead controllable variance?
A) $12,000 unfavorable
B) $12,000 favorable
C) $14,000 unfavorable
D) $26,000 unfavorable

Question

The standard factory overhead rate is $7.50 per machine hour ($6.20 for variable factory overhead and $1.30 for fixed factory overhead) based on 100% capacity of 80,000 machine hours.The standard cost and the actual cost of factory overhead for the production of 15,000 units during August were as follows: $$\begin{array} { l l r } 
\text { Actual: } & \text { Variable factory overhead } & \$ 360,000 \
& \text { Fixed factory overhead } & 104,000 \
\text { Standard: } & 60,000 \text { hours at } \$ 7.50 & 450,000
\end{array}$$ ? What is the amount of the variable factory overhead controllable variance?
A) $12,000 unfavorable
B) $12,000 favorable
C) $14,000 unfavorable
D) $26,000 unfavorable

Quizplus · Accepted Answer

The variable factory overhead controllable variance is calculated as the difference between the actual variable overhead costs and the standard variable overhead costs for the actual hours worked. The standard variable overhead cost for the actual hours (60,000 hours) is $6.20 per hour * 60,000 hours = $372,000. The actual variable overhead was $360,000. Therefore, the variance is $372,000 - $360,000 = $12,000 favorable.

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