College Memories. Inc. publishes college yearbooks. A monthly flexible overhead budget for the firm follows.
COLLEGE MEMORIES, INC. Monthly Flexible Overhead Budget | |||
| Direct-Labor Hours | ||
Budgeted Cost | 1,500 | 1,750 | 2,000 |
Variable costs: | |||
Indirect material: | |||
Glue | $ 750 | $ 875 | $ 1,000 |
Tape | 300 | 350 | 400 |
Miscellaneous supplies | 3,000 | 3,500 | 4,000 |
Indirect labor | 7,500 | 8,750 | 10,000 |
Utilities: | |||
Electricity | 1,500 | 1,750 | 2,000 |
Natural gas | 450 | 525 | 600 |
Total variable cost | $13,500 | $15,750 | $18,000 |
Fixed costs: | |||
Supervisory labor | 12,500 | 12,500 | 12,500 |
Depreciation | 3,400 | 3,400 | 3,400 |
Property taxes and insurance | 4,100 | 4,100 | 4,100 |
Total fixed cost | $20,000 | $20,000 | $20,000 |
Total overhead cost | $33,500 | $35,750 | $38,000 |
The planned monthly production is 6,400 yearbooks. The standard direct-labor allowance is .25 hour per book. During February. College Memories. Inc. produced 8.000 yearbooks and actually used 2.100 direct-labor hours. The actual overhead costs for the month were as follows:
Actual variable overhead | $19,530 |
Actual fixed overhead | 37,600 |
Required:
1.Determine the formula-style flexible overhead budget for College Memories, Inc.
2. Prepare a display similar to Exhibit 11–6, which shows College Memories’ variable-overhead variances for February. Indicate whether each variance is favorable or unfavorable.
3. Draw a graph similar to Exhibit 11–7. which shows College Memories’ variable-overhead variances for February.
4. Explain how to interpret each of the variances computed in requirement (2).
5. Prepare a display similar to Exhibit 11–8, which shows College Memories’ fixed-overhead variances for February.
6. Draw a graph similar to Exhibit 11–9, which depicts the company’s applied and budgeted fixed overhead for February. Show the firm’s February volume variance on the graph.
7. Explain the interpretation of the variances computed in requirement (5).
8. Prepare journal entries to record each of the following:
9. Draw T-accounts for all of the accounts used in the journal entries of requirement (8). Then post the journal entries to the T-accounts.
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