Exercise 9.22 Overhead Variances, Four-Variance Analysis, Journal Entries Laughl
ID: 2417464 • Letter: E
Question
Exercise 9.22
Overhead Variances, Four-Variance Analysis, Journal Entries
Laughlin, Inc., uses a standard costing system. The predetermined overhead rates are calculated using practical capacity. Practical capacity for a year is defined as 1,000,000 units requiring 200,000 standard direct labor hours. Budgeted overhead for the year is $750,000, of which $300,000 is fixed overhead. During the year, 900,000 units were produced using 190,000 direct labor hours. Actual annual overhead costs totaled $800,000, of which $294,700 is fixed overhead.
Required:
1. Calculate the fixed overhead spending and volume variances.
2. Calculate the variable overhead spending and efficiency variances.
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3. Prepare the journal entries that reflect the following:
Assignment of overhead to production
Recognition of the incurrence of actual overhead
Recognition of overhead variances
Closing out overhead variances, assuming they are not material
Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank or enter "0".
a.
b.
c.
d.
Fixed Overhead Spending Variance $__?____ Favorable Fixed Overhead Volume Variance $ -30,000 Unfavorable
Explanation / Answer
Answer (1)
Fixed Overhead
Answer (2)
Variable Overhead
Answer (3) Journal Entries
Standard Labour Hours 200000 Budgeted Units 1000000 Standard Labour Hours Per Unit (200000/1000000) 0.20 Budgeted Fixed Overhead 300000 Standard Direct Labour Hours 200000 Fixed OH Rate per labour hour(300000/200000) 1.5 Actual Fixed Overhead 294700 Applied Fixed Overhead (900000*0.20*1.5) 270000 Spending Overhead : (Budgeted OH-Actual OH) 300000-294700 5300 Volume Overhead :(Applied OH-Budgeted OH): (270000-300000) -30000Related Questions
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