Question

In: Accounting

Mantuach Printing is a highly automated printing company. Mantuach allocates factory overhead based on machine hours....

Mantuach Printing is a highly automated printing company. Mantuach allocates factory overhead based on machine hours. During a recent month, 310 machine hours were worked. These machine hours resulted in the production of 30,000 books.   The production standards have an objective of 100 books per machine hour.

Facts about budgeted and actual factory overhead are as follows:
Actual total variable factory overhead for the month was $250,000.
Variable factory overhead was estimated and applied at $800 per machine hour.
Actual total fixed factory overhead for the month was $120,000.
Fixed factory overhead was estimated and applied at $450 per machine hour.
Mantuach based the fixed overhead allocation rates on an assumed production level of 28,000 books.
(a) Calculate the overhead variances.
(b) Prepare journal entries to apply factory overhead to production, and record the related variances.

Solutions

Expert Solution

Worksheet for Part (1)

               

  1. Variable overhead Variances:

                               

Actual hours                                                       310 machine hours worked

Actual cost of variable overhead                               $250,000

Actual output                                                    30,000 books

Standard hours to achieve output            300 hours (30,000 books / 100 books per hour)

Standard rate per hour                                  $800 per Machine hour

Standard cost of variable overhead         $240,000 (300 hours * $800 per hour)

Variable overhead Efficiency Variance:

Efficiency Variance = Standard overhead rate * (Actual Hours – Standard Hours)

Efficiency Variance = $800 * (310 – 300)

Efficiency Variance = $8,000 Unfavorable

Variable Overhead Spending Variance:

Spending variance = Actual hours worked * (Actual overhead rate – Standard overhead rate)

Spending variance = Actual cost of variable overhead – (Actual hours worked * Standard overhead rate)

Spending variance = $250,000 – (310 * $800)

Spending variance = $250,000 - $248,000

Spending variance = $2,000 Favorable

               

  1. Fixed Overhead Variance:

Actual hours310 hours

Actual cost of fixed overhead$120,000

Actual output$30,000 books

Standard hours to achieve output333 hours (30,000 books / 90 per hour)

Standard rate per hour$450 per hour

Budgeted fixed overhead$149,500 ($450 * 333)

Fixed Overhead Expenditure / Spending Variance:

Expenditure / Spending variance = Actual Fixed Overhead – Budgeted Fixed Overhead

Expenditure / Spending variance = $120,000 – 149,500

Expenditure / Spending variance = $29,500 Favorable

Fixed Overhead Volume Variance:

Volume Variance = Absorbed Fixed Overhead – Budgeted Fixed Overhead

Volume Variance = (Actual Output – Budgeted Output) * Fixed overhead rate

Volume Variance = (30,000 – 28,000) * $450

Volume Variance = $900,000 Favorable

Journal Entries:

Variable Overhead Variance journal

Work in process Inventory                           Dr           $244,000

Variable overhead spending Variance                    Cr            $2,000

Variable overhead efficiency variance    Dr           $8,000

Variance Overhead Expenses                                     Cr            $250,000

(To increase work in process for the standard variable overhead, and record the related spending and efficiency variances)

Fixed Overhead Variance Journal:

Work in process inventory                           Dr           $1,049,500

Fixed overhead Spending variance                          Cr            $29,500

Fixed overhead volume variance                              Cr            $900,000

Fixed overhead Expenses                                            Cr            $120,000

(To increase work in process for the standard fixed overhead, and record the related spending and volume variances)


Related Solutions

Western Company allocates $10 overhead to products based on the number of machine hours used. The...
Western Company allocates $10 overhead to products based on the number of machine hours used. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2? Estimated: Department 1 Department 2 Manufacturing overhead costs $ 263,000 $ 163,000 Direct labor hours 9,300 DLH 25,000 DLH Machine hours 16,300 MH ? MH Multiple Choice 35,600 MH 146,730 MH 87,830 MH 94,500 MH 26,300...
Aztec Builders allocates manufacturing overhead to jobs based on machine hours. The company has the following...
Aztec Builders allocates manufacturing overhead to jobs based on machine hours. The company has the following estimated costs for the upcoming year: Direct materials used $25,000 Direct labour costs $62,000 Salary of factory supervisor $50,000 Advertising expense $33,000 Heating and lighting costs for factory $21,000 Depreciation on factory equipment $41,000 Sales commissions $8,000 The firm estimates that 1,800 direct labour hours will be worked in the upcoming year, while 2,000 machine hours will be used during the year. The predetermined...
Weiters CompanyWeiters Company produces uniforms. The company allocates manufacturing overhead based on the machine hours each...
Weiters CompanyWeiters Company produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Weiters CompanyWeiters Company reports the following cost data for the past? year: Budget Actual Direct labor hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours Machine hours . . . . . . . . . . . ....
Weiters CompanyWeiters Company produces uniforms. The company allocates manufacturing overhead based on the machine hours each...
Weiters CompanyWeiters Company produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Weiters CompanyWeiters Company reports the following cost data for the past? year: Budget Actual Direct labor hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,100 hours 6,100 hours Machine hours . . . . . . . . . . . ....
Snyder Stampings allocates overhead to products based on machine hours. It uses a flexible overhead budget...
Snyder Stampings allocates overhead to products based on machine hours. It uses a flexible overhead budget to calculate a predetermined overhead rate at the beginning of the year. This rate is used during the year to allocate overhead to the various stampings produced. The following table summarizes operations for the last year: Budgeted fixed overhead                                $ 3,800,000 Over-absorbed overhead variance                      $ 220,000 Actual machine hours                                            46,000 Variable overhead per machine hour                        $ 100 Actual overhead incurred                               $ 8,750,000 Required: In...
Hartley uniforms produces uniforms. produces uniforms. The company allocates manufacturing overhead based on the machine hours...
Hartley uniforms produces uniforms. produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Hartley UniformsHartley Uniforms reports the following cost data for the past​ year: LOADING... ​(Click the icon to view the cost​ data.)Read the requirements LOADING... . Requirement 1. Compute the predetermined manufacturing overhead rate. Enter the formula for predetermined manufacturing overhead​ rate, then compute the rate. Estimated yearly overhead costs / Estimated yearly machine hours = Predetermined overhead rate $194,400 / 7,200...
Suit Up produces uniforms. The company allocates manufacturing overhead based on the machine hours each job...
Suit Up produces uniforms. The company allocates manufacturing overhead based on the machine hours each job uses. Suit Up reports the following cost data for the past​ year: Requirements 1. Compute the predetermined manufacturing overhead rate. 2. Calculate the allocated manufacturing overhead for the past year. 3. Compute the underallocated or overallocated manufacturing overhead. How will this underallocated or overallocated manufacturing overhead be disposed​ of? 4. How can managers use accounting information to help control manufacturing overhead​ costs? Budget Actual...
Franklin Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead...
Franklin Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Activities Unit Level Batch Level Product Level Facility Level Cost $ 66,700 $ 23,970 $ 12,000 $ 288,000 Cost driver 2,900 labor hrs. 47 setups Percentage of use 18,000 units Production of 900 sets of cutting shears, one of the company’s 20 products,...
Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead...
Solomon Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Activities Unit Level Batch Level Product Level Facility Level Cost $ 75,600 $ 22,800 $ 11,000 $ 234,000 Cost driver 2,800 labor hrs. 40 setups Percentage of use 13,000 units Production of 830 sets of cutting shears, one of the company’s 20 products,...
Munoz Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead...
Munoz Company produces commercial gardening equipment. Since production is highly automated, the company allocates its overhead costs to product lines using activity-based costing. The costs and cost drivers associated with the four overhead activity cost pools follow: Activities Unit Level Batch Level Product Level Facility Level Cost $ 72,900 $ 15,840 $ 11,000 $ 306,000 Cost driver 2,700 labor hrs. 33 setups Percentage of use 17,000 units Production of 860 sets of cutting shears, one of the company’s 20 products,...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT