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Cranium Creations develops, produces, and distributes a line of intellectually challenging and...

Question:

Cranium Creations develops, produces, and distributes a line of intellectually challenging and stimulating games. The company's accounting department has accumulated the following information for the purpose of computing and interpreting the company's factory overhead variances.

Standard hours at 100% of normal capacity 8,300
Actual hours for actual units produced 9,100
Standard hours for actual production 8,700
Variable factory overhead rate $5.00 per hour
Fixed factory overhead rate $3.25 per hour
Actual variable factory overhead $57,350
Actual fixed factory overhead $27,600

Required:

A) Based on the preceding information, what is Cranium Creations' variable factory overhead controllable variance?

B) Based on the preceding information, what is Cranium Creations' fixed factory overhead volume variance?

Factory Overhead Variances:

Overhead refers to the indirect costs attributable to the production process but not necessarily to individual units of production. These indirect costs include items such as management salaries, rent expense, and repairs and maintenance. Management develops expectations for overhead costs based on historical data and industry norms; however, these standards are only approximations. Thus, standards often vary from actual results. These differences are called variances.

Answer and Explanation: 1

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A) Calculate the variable factory overhead controllable variance

The variable factory overhead controllable variance refers to the portion of the...

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Variance Formulas for Cost Accounting

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Chapter 3 / Lesson 5
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In accounting, variance refers to the difference between actual and projected expenditures. Learn how to calculate variance formulas for cost accounting, explore price, efficiency, spending, and variable overhead variances, and understand the importance of each in evaluating financial performance.


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