Albrecht 19.pdf - Marriott School

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1000 Part 6 Control in a Management Accounting System | EOC
Data for August:
Actual variable manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 217,000
Actual fixed manufacturing overhead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 265,700
Actual units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
Actual direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,000
Annual budget data:
Budgeted variable manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,611,200
Budgeted fixed manufacturing overhead cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,304,800
Budgeted units of production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,000
Budgeted direct labor hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 408,000
Required:
1. Compute the annual variable manufacturing overhead rate and annual fixed manufacturing
overhead rate to be used to apply overhead to Work-in-Process Inventory.
2. Determine the variable overhead spending variance and the variable overhead efficiency
variance for August.
3. Determine the fixed overhead budget variance and the volume variance for August.
4. Prepare the journal entry to transfer standard variable and fixed overhead costs to
Work-in-Process Inventory.
P 19-65
LO5
Variable Manufacturing Overhead Variances
Grover Glove Company attempts to control manufacturing overhead costs through the use of
a flexible budget. Standards are set by studying historical overhead cost data, which are shown
here. Actual total overhead costs for each month of the second quarter are also shown.
Standard variable overhead: $2.20 per direct labor hour
Actual Direct Actual Variable Standard Hours
Months Labor Hours Overhead Costs Allowed
April 76,000 $155,500 74,500
May 83,000 172,000 80,000
June 63,500 148,000 65,000
Required:
1. Compute the variable overhead spending variance and the variable overhead efficiency
variance for each month.
2. Interpretive Question: Give several reasons why the variable overhead spending variances
might be unfavorable.
P 19-66
LO6
Fixed Manufacturing Overhead Variances
Standard and actual cost data for Willey Corporation for the first three quarters of the year
are shown below.
Standards:
Machine hours per unit produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.0 machine hours
Units produced per quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 units
Fixed manufacturing overhead per quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $325,000
Actual Direct Actual Fixed Actual Number of
Machine Hours Overhead Costs Units Produced
First quarter 126,000 $321,000 25,500
Second quarter 120,000 330,000 23,000
Third quarter 124,000 324,500 26,500
(continued)