Question

Plimpton Company produces countertop ovens. Plimpton uses a standard costing system. The standard costing system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that two direct labor hours should be used for every oven produced. The normal production volume is 100,000 units. The budgeted overhead for the coming year is as follows: Fixed overhead $770,000 444,000 Variable overhead * At normal volume. Plimpton applies overhead on the basis of direct labor hours. During the year, Plimpton produced 97,000 units, worked 196,000 direct labor hours, and incurred actual fixed overhead costs of $780,000 and actual variable overhead costs of $435,600. Required: 1. Calculate the standard fixed overhead rate and the standard variable overhead rate. Round your answers to the nearest cent. Use rounded answers in the subsequent computations. Standard fixed overhead rate $ 3.85 per direct labor hour Standard variable overhead rate $ 2.22 per direct labor hour 2. Compute the applied fixed overhead and the applied variable overhead. Use the application rates from part (1) in your calculations. Fixed $ 746,900 Variable $ 430,680 →

I need help with Part 6. Numbers 3 and 4

These are wrong and have a red mark next to them

Answer 1

1) Budgeted Direct Labor Hours = Normal production*Direct labor hour per unit

= 100,000 units*2 hours = 200,000 hours

Standard Fixed Overhead rate = Budgeted Fixed Overhead/Budgeted Direct Labor Hours

= $770,000/200,000 hrs = $3.85 per hour

Standard Variable Overhead rate = Budgeted Variable Overhead/Budgeted Direct Labor Hours

= $444,000/200,000 hrs = $2.22 per hour

2) Applied Fixed Overhead = Std labor hours for actual production*Standard Fixed Overhead rate

= (97,000 units*2 hrs)*$3.85= $746,900

Applied Variable Overhead = Std labor hours for actual production*Standard Variable Overhead rate

= (97,000 units*2 hrs)*$2.22= $430,680

Total fixed overhead variance = Applied Fixed Overhead - Actual Fixed Overhead

= $746,900 - $780,000 = -$33,100 Unfavorable

Total variable overhead variance = Applied Variable Overhead - Actual Variable Overhead

= $430,680 - $435,600 = -$4,920 Unfavorable

3) Fixed Overhead spending variance = Budgeted Fixed Overhead - Actual Fixed Overhead

= $770,000 - $780,000 = -$10,000 Unfavorable

Fixed overhead volume variance = Applied Fixed Overhead - Budgeted Fixed Overhead

= $746,900 - $770,000 = -$23,100 Unfavorable

4) Variable Overhead spending variance = (Actual labor hours*Std variable rate) - Actual Variable Overhead

= (196,000 hrs*$2.22) - $435,600 = -$480 Unfavorable

Variable overhead Efficiency variance = Applied Variable overhead - (Actual labor hours*Std variable rate)

= $430,680 - (196,000*2.22) = -$4,440 Unfavorable

5) Volume Variance = -$23,100 Unfavorable

Variable Overhead Efficiency Variance = -$4,440 Unfavorable

Spending Variance = -10,000-480 = -$10,480 Unfavorable

6) Journal Entries (Amounts in $)

No	Account Titles	Debit	Credit
1)	Work in Process (430,680+746,900)	1,177,580
	Variable Overhead Control (Applied)		430,680
	Fixed Overhead Control (Applied)		746,900
2)	Variable Overhead Control (Actual)	435,600
	Fixed Overhead Control (Actual)	780,000
	Miscellaneous Accounts (435,600+780,000)		1,215,600
3)	Fixed Overhead Spending Variance	10,000
	Fixed Overhead Volume Variance	23,100
	Variable Overhead Spending Variance	480
	Variable Overhead Efficiency Variance	4,440
	Fixed Overhead Control (10,000+23,100)		33,100
	Variable Overhead Control (480+4,440)		4,920
4)	Cost of goods sold	38,020
	Fixed Overhead Spending Variance		10,000
	Fixed Overhead Volume Variance		23,100
	Variable Overhead Spending Variance		480
	Variable Overhead Efficiency Variance		4,440