The Cosomo Corporation produces one main product. The company employs a standard cost system. Below is October’s flexible budget:
Factory overhead is applied based on normal capacity. The number of standard direct labor hours allowed for October’s production is 850 hours. Actual factory overhead costs for October were $3,350. Actual direct labor hours worked for the month were 910 hours. Normal capacity is 800 direct labor hours. A job order cost system is used to accumulate costs.
|
Direct labor hours |
800 |
900 |
1,000 |
|
Variable factory overhead: |
|||
|
Indirect materials |
$ 600 |
$ 675 |
$ 750 |
|
Indirect labor |
400 |
450 |
500 |
|
Supplies |
200 |
225 |
250 |
|
Total variable |
$1,200 |
$1,350 |
$1,500 |
|
Fixed factory overhead: |
|||
|
Factory rent |
$ 950 |
$ 950 |
$ 950 |
|
Depreciation on equipment |
700 |
700 |
700 |
|
Supervisor |
240 |
240 |
240 |
|
Total fixed |
$1,890 |
$1,890 |
$1,890 |
|
Total factory overhead |
$3,090 |
$3,240 |
$3,390 |
Required: Calculate the factory overhead variance for October using the Two-factor analysis method.
