Question

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 and spent $15.600 on variable overhead during the month. For March, the Platter Valley factory of Bybee Industries budgeted $90,000 for fixed factory overhead cost. Its practical capacity is 2.500 direct labor hours per month (to manufacture 5.000 pairs of boots). The factory used 2.700 direct labor hours in March to manufacture 4.800 pairs of boots. The actual fixed overhead cost Incurred for the month was $92.000. The Platter Valley factory of Bybee Industries currently uses a four-variance analysis of the total factory overhead cost varlance but is thinking of changing to a three-varlance analysis. Required: 1. Compute the total overhead spending variance, the variable overhead) efficiency varlance, and the production volume variance for March and Indicate whether each variance is favorable (F) or unfavorable (U). 2. Prepare the appropriate Journal entries at the end of March to record each of the following: (a) the total overhead spending variance, (b) the variable overhead) efficiency variance, and (c) the production volume variance. Assume that all overhead costs are recorded in a single account called "Factory Overhead." Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the appropriate journal entries at the end of March to record each of the following: (a) the total overhead spending variance, (b) the (variable overhead) efficiency variance, and (c) the production volume variance. Assume that all overhead costs are recorded in a single account called "Factory Overhead." (If no entry is required for a transaction/event, select "No journal entry required in the first account field.) Show less View transaction list Journal entry worksheet Record the total overhead spending variance for the period.

Answer 1

1)

Variable Factory overhead variances
Standard variable overhead rate per DLH= Budgeted total variable factory overhead/Budgeted hours
= 15000/2500 hours = $6 per DLH
Standard DLH per unit = budgeted total DLH/ Budgeted total units
= 2500DLH/5000 Units=			0.5	DLH/unit
	Actual Cost				Standard costs
	(AQ*AP)		(AQ*SP)		(SQ*SP)
	2700 Hrs * 5.77/hr		2700hours * $6		(4800 * 0.5) hours 8 $6
	$15,600		$16,200		$14,400
	Spending Variance	$600		Efficiency variance	$1,800
		(Favourable)			(Unfavourable)
	(16200-15600)			(16200-14400)
	Flexible budget variance		$1,200
	(15600-14400)		(Unfavourable)
Fixed Overhead variances
Standard Fixed factory overhead application rate = Budgeted Fixed overhead/total hours
=90000/2500 DLH		$36	Per DLH
	Actual Cost				Applied
	(AQ*AP)		Budget		(SQ*SP)
	$36 Per Hour				(4800*0.5)hours * $36
	$92,000		$90,000		$86,400
	Spending Variance	$2,000		Production Volume Variance	$3,600
		(Unfavourable)
	(92000-9000)			(90000-86400)

2)

Journal Entries
	Factory overhead	$600.00
	Variable overhead spending variance		$600.00
	Variable overhead efficiency variance	$1,800.00
	Factory overhead		$1,800.00
	Fixed overhead spending variance	$2,000.00
	Factory overhead		$2,000.00
	Production Volume variance	$3,600.00
	Factory overhead		$3,600.00

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