Lopez Company uses a standard cost system in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 6 machine-hours of variable manufacturing overhead at $8 per hour and 6 machine-hours of fixed manufacturing overhead at $15 per hour. Actual output achieved was 4,400 units. Variable manufacturing overhead incurred was $245,000. Fixed manufacturing overhead incurred was $373,000.
Actual incurred machine-hours were 28,400.
1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing over head variances, using the four-variance analysis in Exhibit 8-12.
2. Prepare journal entries using the four-variance analysis.
3. Describe how individual variable manufacturing overhead items are controlled from day to day. Also, describe how individual fixed manufacturing overhead items are controlled.