Question

The motions corporation is a manufacturer of centrifuges. Fixed and variable manufacturing overheads are allocated to each centrifuge using budgeted assembly hours. Budgeted assembly time is 2 hours per unit. The following tables shows the budgeted amounts and actual results related to overhead of June 2017.

© Data Table - X Fle Ву Actual Results Static Budget The Motions Corporation (June 2017) 220 180 396 Number of centrifuges assembled and sold Hours of assembly time Variable manufacturing overhead cost per hour of assembly time Variable manufacturing overhead costs Fixed manufacturing overhead costs 29.00 11,896 17,940 $ 16,560 Print Done wer. Clear All

1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances.

2. Prepare journal entries for Motions' June 2017 variable and fixed manufacturing overhead costs and variances; write odd these variances to Cost of Goods Sold for the quarter ending June 30, 2017.

3. How does the planning and control of variable manufacturing overhead costs differ from the planning and control of fixed manufacturing overhead costs?

Answer 1

Part 1

	Actual	Flexible Budget	Static Budget
Outputs units (number of assembled units)	220	220	180
Hours of assembly time	396	440 (220*2)	360 (180*2)
Assembly hours per unit	1.80 (396/220)	2	2
Variable mfg. overhead cost per hour of assembly time	30.04	29	29
Variable mfg. overhead costs	11896	12760	6600
Fixed mfg. overhead costs	17940	16560	16560
Fixed mfg. overhead costs per hour of assembly time	45.30		46

	Spending Variance	Efficiency Variance	Production-Volume Variance
Variable Manufacturing Overhead	412 U (11896-(396*29))	1276 F (396*29)-12760	Never a variance
Fixed Manufacturing Overhead	1380 U (17940-16560)	Never a variance	3680 F (16560-(440*46))

Part 2

Variable Manufacturing Costs and Variances

No.	Account titles and explanation	Debit	Credit
a	Variable Manufacturing Overhead Cost Control	11896
	Accounts Payable Control and Various Other Accounts		11896
	(to record actual variable manufacturing overhead costs incurred)
b	Work-in-Process Control	12760
	Variable manufacturing Overhead Allocated		12760
	(to record variable manufacturing overhead allocated)
c	Variable Manufacturing Overhead Allocated	12760
	Variable Manufacturing Overhead Spending Variance	412
	Variable Manufacturing Overhead Control		11896
	Variable Manufacturing Overhead Efficiency Variance		1276
	(to isolate variances for the accounting period)
d	Variable Manufacturing Overhead Efficiency Variance	1276
	Variable manufacturing Overhead Spending Variance		412
	Cost of Goods Sold		864
	(to write off variable manufacturing overhead variances to cost of goods sold)

Fixed Manufacturing Costs and Variances

No.	Account titles and explanation	Debit	Credit
a	Fixed Manufacturing Overhead Cost Control	17940
	Salaries Payable, Account Depreciation, various other accounts		17940
	(to record fixed manufacturing overhead costs incurred)
b	Work-in-Process Control (440*46)	20240
	Fixed manufacturing Overhead Allocated		20240
	(to record fixed manufacturing overhead allocated)
c	Fixed Manufacturing Overhead Allocated	20240
	Fixed manufacturing Overhead Spending Variance	1380
	Fixed Manufacturing Overhead Production-Volume Variance		3680
	Fixed Manufacturing Overhead Control		17940
	(to isolate variances for the accounting period)
d	Fixed Manufacturing Overhead Production-Volume Variance	3680
	Fixed manufacturing Overhead Spending Variance		1380
	Cost of goods sold		2300
	(to write off fixed manufacturing overhead variances to cost of goods sold)

Part 3

Both long run and short run focuses are emphasized by the planning and control of variable manufacturing overhead costs whereas planning and control of fixed manufacturing overhead costs emphasizes mainly on the long run focus. Planning and control of variable manufacturing overhead costs firstly undertakes value added overhead activities and then also manages cost drivers related to those activities efficiently. On the other hand, planning and control of fixed manufacturing overhead costs manages only value added activities related to budgeted level of output.