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Wells Inc., a manufacturer of construction equipment

Problem 6-4A p. 250
Standard factory overhead
Variance report

Wells Inc., a manufacturer of construction equipment, prepared the following factory overhead cost budget for the Welding Department for May 2003. The company expected to operate the department at 100% of normal capacity of 3,000 hours.

Variable costs:
Indirect factory wages $22,800
Power and light 3,750
Indirect materials 10,200
Total variable cost $36,750

Fixed costs:
Supervisory salaries $67,500
Depreciation of plant and equipment 26,400
Insurance and property taxes 5,100
Total fixed cost 99,000

Total factory and overhead cost $135,750

During May, the department operated at 3,100 hours, and the factory overhead costs incurred were: indirect factory wages, $23,450: power and light, $3,980: indirect materials, $10,600; supervisory salaries, $67,500; depreciation of plant and equipment, $26,400; and insurance and property taxes, $5,100.


Prepare a factory overhead cost variance report for May. To be useful for cost control, the budgeted amounts should be based on 3,100 hours.