Answer:
(1) $5,300 F; $30,000
(2) $77,800 U; $22,500 U
Explanation:
1. Fixed Overhead Spending variance:
= Budgeted Fixed Overhead - Actual Fixed Overhead
= 300,000 -294,700
= $5,300 Favorable
Fixed Overhead Volume variance:
= (Standard Output -Actual Output ) × Fixed Overhead absorption rate per unit of output
= (1,000,000 - 900,000) × (300,000 ÷ 1,000,000)
= 30,000 Unfavorable
2. Actual Hours = 190,000
Actual variable Overhead = 800,000 -294,700
= 505,300
Standard variable Overhead rate = (750,000 - 300,000) ÷ 200,000
= 2.25
Variable Overhead Spending Variance:
= (Actual hours × Standard variable overhead rate per hour) - Actual manufacturing overhead
= (190,000 × 2.25) - 505,300
= 77,800 unfavorable
Variable overhead Efficiency variance:
= (Standard Hour - Actual Hour) × Standard variable Overhead rate
= [(200,000 ÷ 1,000,000) × 900000 - 190,000] × 2.25
= $22,500 Unfavorable
3. The Journal entries are as follows:
WIP inventory A/C Dr. $727,500
To Fixed manufacturing Overhead $300,000
To Variable manufacturing Overhead $427,500
(To record fixed and variable manufacturing overhead)
Workings:
Variable manufacturing Overhead = 190,000 × 2.25
= $427,500
Fixed manufacturing Overhead A/c Dr. $5,300
WIP Inventory A/C Dr. $72,500
To Variable manufacturing Overhead $77,800
(To record Closing out overhead variances)
