Question

Integrate and reconcile all overhead variances. (Continuation of 8-46).
In exercise
CellOne is a cellular phone service reseller, contracting with major cellular operators for airtime in bulk and then reselling service to retail customers. Having adopted an ABC system last year, CellOne has defined the following activity areas- contracting, marketing, technical service, and customer service. The technical service area has one major cost driver-technical support hours. One hour of technical support is budgeted for every 5,000 minutes of airtime sold. For the month ended August 31, 2013, CellOne budgeted to sell 6,850,000 minutes; however, actual minutes sold totalled 7,350,000. During August 2013, 1,500 actual technical support hours were logged. Some additional data follow:
FlatScreen's budget was based on the assumption that 17,760 units (panels) will be manufactured during 2013. The planned allocation rate was two machine-hours per unit. FlatScreen uses machine-hours as the cost driver. Actual number of machine-hours used during 2013 was 36,480. The budgeted variable manufacturing overhead costs equal $1,704,960.
REQUIRED
1. Prepare appropriate journal entries for variable and fixed manufacturing overhead (you will need to calculate the different variances to accomplish this).
2. Overhead variances may be used to reconcile the Cost of Goods Sold account at the end of the fiscal year. Cost of goods sold (COGS) is then entered on the income statement. Show how COGS is reconciled through journal entries.


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  • CreatedJuly 31, 2015
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