Franklin Glass Works has the capacity to manufacture 200,000 units for the year ended November 30, 2010.
Question:
Franklin Glass Works has the capacity to manufacture 200,000 units for the year ended November 30, 2010. The standard cost sheet specifies two direct labor hours (DLHs) for each unit manufactured. Total factory overhead was budgeted at $900,000 for the year with a fixed overhead rate of $3 per unit. Both fixed and variable overhead are assigned to products on the basis of standard DLHs. The actual data for the year ended November 30, 2010, follow:
Capacity | 200,000 | |
Total budgeted overhead | $900,000 | |
Fixed factory overhead per unit | $3 | |
Standard DLHs per unit produced | 2 | |
Actual results for the year: | ||
Units manufactured | 198,000 | |
Direct labor hours worked | 440,000 | |
Variable factory overhead incurred | $352,000 | |
Fixed factory overhead incurred | $575,000 |
Required
1. Determine the following for the year just completed:
a. Total standard hours allowed for the units manufactured.
b. Variable overhead efficiency variance.
c. Variable overhead spending variance.
d. Fixed overhead spending variance.
e. Total fixed overhead cost applied to units manufactured.
f. Production-volume variance.
2. Prepare appropriate journal entries for the four-variance analysis. Assume the company uses only two overhead accounts, one for variable overhead, the other for fixed overhead.
3. Provide a concise explanation of each of the four overhead variances you calculated.
Step by Step Answer:
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins