Montreal Scholastic Supply Company uses a standard-costing system. The firm estimates that it will operate its manufacturing facilities at 800,000 machine hours for the year. The estimate for total budgeted overhead is $2,000,000. The standard variable-overhead rate is estimated to be $2 per machine hour or $6 per unit. The actual data for the year are presented below.
Actual finished units | 250,000 |
Actual machine hours | 764,000 |
Actual variable overhead | $1,701,000 |
Actual fixed overhead | $ 392,000 |
Required:
1. Compute the following variances. Indicate whether each is favorable or unfavorable, where appropriate.
a. Variable-overhead spending variance.
b. Variable-overhead efficiency variance.
c. Fixed-overhead budget variance.
d. Fixed-overhead volume variance.
2. Prepare journal entries to
a. Record the incurrence of actual variable overhead and actual fixed overhead.
b. Add variable and fixed overhead to Work-in-Process Inventory.
c. Close underapplied or overapplied overhead into Cost of Goods Sold.
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