Question

In: Accounting

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes...

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing overhead. The firm traces all direct costs to products, and it assigns overhead based on direct labor hours. The company budgeted $15,000 variable overhead and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March. The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots and spent $15,600 on variable overhead during the month. For March the Platter Valley factory of Bybee Industries budgeted $90,000 of fixed overhead. Its practical capacity is 2,500 direct labor hours per month (to manufacture 5,000 pairs of boots). The actual fixed overhead incurred for the month was $92,000.

a. Provide appropriate journal entries to record the variable overhead spending and efficiency variances.

b. The Platter Valley factory of Bybee Industries uses a three-variance analysis of the total factory overhead variance.

Required: 1. Compute the total overhead spending variance, the efficiency variance, and the fixed overhead production volume variance.

2.Determine the spending variances (both variable and fixed), the efficiency variance, and the fixed overhead production volume variance.

Solutions

Expert Solution

(a) Preparation of journal entries to record the variable overhead spending and efficiency variances.We have,

Budgeted variable factory overhead	$ 15,000
Budgeted direct labor hours	2,500
Budgeted production in pair of boots	5,000
Actual variable factory overhead	$ 15,600
Actual direct labor hours	2,700
Actual production in pair of boots	4,800

(1) Standard variable overhead rate per direct labor hour = BudgetedTotal Variable Factory Overhead / Budgeted Total Direct Labor Hours

Standard variable overhead rate per direct labor hour = 15,000 / 2,500 = $ 6.00

(2) Standard direct-labor hours per unit = Budgeted Total Direct Labor Hours / Budgeted Total Units

Standard direct-labor hours per unit = 2,500 / 5,000 = 0.5 per unit

(3) Actual variable overhead rate per direct labor hour = Actual Total Variable Factory Overhead / Actual Total Direct Labor Hours

Actual variable overhead rate per direct labor hour = 15,600 / 2,700 = $ 5.777 per hrs

(i) Variable overhead spending variances = Actual production units ( Actual price - Standard price)

Variable overhead spending variances = 2,700 ( 5.777 - 6.00) = $ 600 ( Favourable)

(ii) Variable overhead efficiency variances = ( Actual hours - Standard hours ) Standard rate

Variable overhead efficiency variances = ( 2,700 - 2,400) 6.00 = $ 1,800 ( Unfavourable)

Journal entry:

(1) To record favourable variable overhead spending variances.

Dr. Factory Overhead (Variable Factory Overhead) - $ 600

Cr. Variable Overhead Spending Variance - $ 600

(2) To record unfavourable Variable overhead efficiency variances.

Dr. Variable overhead efficiency variances - $ 1,800

Cr. Factory Overhead (Variable Factory Overhead) - $ 1,800

(b)

Budgeted Fixed factory overhead	$ 90,000
Budgeted direct labor hours	2,500
Budgeted production in pair of boots	5,000
Actual Fixed factory overhead	$ 92,000
Actual direct labor hours	2,700
Actual production in pair of boots	4,800

(a) Standard fixed factory overhead application rate per direct labor hour = Budgeted Fixed Factory Overhead / Total Direct Labor Hours

Standard fixed factory overhead application rate per direct labor hour = 90,000 / 2,500 = $ 36.00

(b) Standard direct-labor hours per unit = Budgeted Total Direct Labor Hours / Budgeted Total Units

Standard direct-labor hours per unit = 2,500 / 5,000 = 0.5 per unit

(c) Actual fixed overhead rate per direct labor hour = Actual Total Fixed Factory Overhead / Actual Total Direct Labor Hours

Actual fixed overhead rate per direct labor hour = 92,000 / 2,700 = $ 34.00 per hrs

(1) Computation of the total overhead spending variance, the efficiency variance, and the fixed overhead production volume variance.We have,

(a) Fixed overhead spending variances = Actual Fixed Cost - Budgeted Fixed Cost

Fixed overhead spending variances = 92,000 - 90,000 = $ 2,000 (U)

(b) Fixed overhead efficiency variances = ( Standard production hrs - Actual production hrs) Standard rate

Fixed overhead efficiency variances = ( 2,500 - 2,400) 36 = $ 3,600 (F)

( c) Fixed overhead production volume variances = 90,000 - 2,400 x 36 = $ 3,600 (U)

(2) Determination of spending variances (both variable and fixed), the efficiency variance, and the fixed overhead production volume variance.We have,

Spending variances = 600 (F) + 2,000 (U) = $ 1,400 (U)

Efficiency variances = 1,800 (U) + 3,600 (F) = $ 1,800 (F)

Production Volume variances = 600 (F) + 3,600 (U) = $ 3,000 (U)

ekkarill92 answered 11 months ago

Next > < Previous

Related Solutions

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes...

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours. The company budgeted $10,250 variable factory overhead cost and 2,050 direct labor hours to manufacture 4,100 pairs of boots in March. The factory used 3,500 direct labor hours in March to manufacture 4,000 pairs of boots...

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes...

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours. The company budgeted $14,160 variable factory overhead cost and 2,400 direct labor hours to manufacture 4,800 pairs of boots in March. The factory used 2,800 direct labor hours in March to manufacture 4,700 pairs of boots...

[The following information applies to the questions displayed below.] The Platter Valley factory of Bybee...

[The following information applies to the questions displayed below.] The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing overhead. The firm traces all direct costs to products, and it assigns overhead based on direct labor hours. The company budgeted $15,000 variable overhead and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March. The factory used 2,700 direct labor hours in March to manufacture...

The Platter Valley factory of Bybee Industries currently uses a four-variance analysis of the total factory overhead cost variance but is thinking of changing to a three-variance analysis.

The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns overhead cost to products based on direct labor hours. The company budgeted $15,000 variable factory overhead cost and 2,500 direct labor hours to manufacture 5,000 pairs of boots in March. The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots...

Stuart Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it...

Stuart Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men’s department has a sales staff of nine employees, the manager of the women’s department has six employees, and the manager of the children’s department has three employees. All departments are housed in a single store. In recent years, the children’s department has operated at a net loss and is expected...

Perez Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it...

Perez Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men’s department has a sales staff of nine employees, the manager of the women’s department has six employees, and the manager of the children’s department has three employees. All departments are housed in a single store. In recent years, the children’s department has operated at a net loss and is expected...

Franklin Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it...

Franklin Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men’s department has a sales staff of nine employees, the manager of the women’s department has six employees, and the manager of the children’s department has three employees. All departments are housed in a single store. In recent years, the children’s department has operated at a net loss and is expected...

Campbell Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it...

Campbell Boot Co. sells men’s, women’s, and children’s boots. For each type of boot sold, it operates a separate department that has its own manager. The manager of the men’s department has a sales staff of nine employees, the manager of the women’s department has six employees, and the manager of the children’s department has three employees. All departments are housed in a single store. In recent years, the children’s department has operated at a net loss and is expected...

12. Diamond Boot Factory normally sells their specialty boots for $28 a pair. An offer to...

12. Diamond Boot Factory normally sells their specialty boots for $28 a pair. An offer to buy 50 boots for $22 per pair was made by an organization hosting a national event in Norfolk. The variable cost per boot is $10 and special stitching will add another $3 per pair to the cost. Determine the differential income or loss per pair of boots from selling to the organization. Enter the amount as a positive number. Differential________ per pair of boots...

Hunter Industries manufactures hunting boots. The firm assigns overhead cost to products based on direct labor...

Hunter Industries manufactures hunting boots. The firm assigns overhead cost to products based on direct labor hours. For November, the budget reported total overhead of $ 162,000, of which $ 130,500 was fixed. Practical capacity is 4,500 direct labor hours per month to manufacture 6,000 pairs of boots. The factory used 4,600 direct labor hours to manufacture 5,700 pairs of boots. For November, actual variable overhead cost incurred was $ 31,510; actual fixed overhead cost incurred was $ 133,000. 1....

Subjects