Problem:
The Finishing Department of Paragon Manufacturing Co. prepared the following factory overhead cost budget for October of the current year, during which it expected to operate at a 100% capacity of 10,000 machine hours:
| Variable cost: |
|
|
| Indirect factory wages |
$18,000
|
|
| Power and light |
12,000
|
|
| Indirect materials |
4,000
|
|
| Total variable cost |
|
$34,000
|
| Fixed cost: |
|
|
| Supervisory salaries |
$12,000
|
|
| Depreciation of plant and |
|
|
| equipment |
8,800
|
|
| Insurance and property taxes |
3,200
|
|
| Total fixed cost |
|
24,000
|
| Total factory overhead |
|
$58,000
|
|
|
|
During October, the plant was operated for 9,000 machine hours and the factory overhead costs incurred were as follows: indirect factory wages, $16,400; power and light, $10,000; indirect materials, $3,000; supervisory salaries, $12,000; depreciation of plant and equipment, $8,800; insurance and property taxes, $3,200.
Required:
Question: Prepare a factory overhead cost variance report for October. (The budgeted amounts for actual amount produced should be based on 9,000 machine hours.)
Note: Explain all steps comprehensively.