The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows:
0 What is the amount of the factory overhead controllable variance?
A) $10,000 favorable
B) $2,500 unfavorable
C) $10,000 unfavorable
D) $2,500 favorable

Question

The standard factory overhead rate is $10 per direct labor hour ($8 for variable factory overhead and $2 for fixed factory overhead) based on 100% capacity of 30,000 direct labor hours. The standard cost and the actual cost of factory overhead for the production of 5,000 units during May were as follows: 
0 What is the amount of the factory overhead controllable variance?
A) $10,000 favorable 
B) $2,500 unfavorable 
C) $10,000 unfavorable 
D) $2,500 favorable

Quizplus · Accepted Answer

First, we need to calculate the standard factory overhead rate per unit:

Standard factory overhead rate = $10 per DL hour x 30,000 DL hours (100% capacity) / 30,000 units = $10 per unit

Next, we need to calculate the standard factory overhead cost for the production of 5,000 units:

Standard factory overhead cost = $10 per unit x 5,000 units = $50,000

Now, we can calculate the factory overhead controllable variance using the information given:

Actual factory overhead cost = $53,750

Standard factory overhead cost = $50,000

Variance = Actual – Standard = $53,750 – $50,000 = $3,750 unfavorable

Therefore, the amount of the factory overhead controllable variance is $2,500 unfavorable ($3,750 unfavorable for variable factory overhead - $1,250 favorable for fixed factory overhead).

The Standard Factory Overhead Rate Is $10 Per Direct Labor