In: Accounting
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.
Fixed Overhead Spending Variance | $ | Favorable |
Fixed Overhead Volume Variance | $ | Unfavorable |
2. Calculate the variable overhead spending and efficiency variances.
Variable Overhead Spending Variance | $ | Unfavorable |
Variable Overhead Efficiency Variance | $ | Unfavorable |
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3. Prepare the journal entries that reflect the following:
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. | Work in Process | ||
Variable Overhead Control | |||
Fixed Overhead Control | |||
b. | Variable Overhead Control | ||
Fixed Overhead Control | |||
Miscellaneous Accounts | |||
c. | Fixed Overhead Volume Variance | ||
Variable Overhead Spending Variance | |||
Variable Overhead Efficiency Variance | |||
Fixed Overhead Spending Variance | |||
Fixed Overhead Control | |||
Variable Overhead Control | |||
d. | Cost of Goods Sold | ||
Fixed Overhead Volume Variance | |||
Variable Overhead Spending Variance | |||
Variable Overhead Efficiency Variance | |||
Fixed Overhead Spending Variance | |||
Cost of Goods Sold |
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