Question

Barley Hopp, Inc., manufactures custom-ordered commemorative beer steins. Its standard cost information follows:

	Standard Quantity		Standard Price (Rate)			Standard Unit Cost
Direct materials (clay)	1.7	lbs.	$	1.60	per lb.	$	2.72
Direct labor	2.4	hrs.	$	6.00	per hr.		14.40
Variable manufacturing overhead (based on direct labor hours)	2.4	hrs.	$	1.30	per hr.		3.12
Fixed manufacturing overhead ($235,520 ÷ 92,000 units)							2.56

Barley Hopp had the following actual results last year:

Number of units produced and sold		120,400
Number of pounds of clay used		120,000
Cost of clay	$	180,000
Number of labor hours worked		155,400
Direct labor cost	$	393,400
Variable overhead cost	$	169,400
Fixed overhead cost	$	325,000

Required:
Prepare the journal entry to record Barley Hopp’s fixed manufacturing overhead costs and related variances for last year. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

Fixed overhead Spending variance =Actual fixed overhead -Budgeted fixed overhead

                = 325000 -235520

               = 89480 U

Fixed overhead volume variance =Budgeted fixed overhead- Standard fixed overhead cost for actual output

               = 235520 - [120400 *2.56]

              = 235520-308224

             =- 72704 F

Date	Account title	Debit	credit
A	Fixed overhead expense	325000
	Accounts payable		325000
	[Being actual fixed overhead cost incurred]
B	Work in process inventory (120400*2.56)	308224
	Fixed overhead Spending variance	89480
	Fixed overhead volume variance		72704
	Fixed overhead expense		325000
	[To close fixed overhead variance]