In all of the exercises involving variances, use “F” and “U” to designate favorable and...

In all of the exercises involving variances, use “F” and “U” to designate favorable and unfavorable variances, respectively.

Making journal entries for factory overhead and variances; analysis of variances

The normal capacity of a manufacturing plant is 30,000 direct labor hours or 20,000 units per month. Standard fixed costs are $6,000, and variable costs are $12,000. Data for two months follow:

For each month, make a single journal entry to charge overhead to Work in Process, to close Factory Overhead, and to record variances. Indicate the types of variances and state whether each is favorable or unfavorable. (Hint: You must first compute the flexible-budget and production-volume variances.)