3. The practical capacity for a year is defined as 20,000 units requiring 25,000 direct labor hours. The total budgeted overhead cost is $170,000, of which the budgeted variable overhead cost is $95,000. The standard direct labor cost is $3 per direct labor hour. The labor efficiency variance is $2,625 favorable. The actual units produced are 18,500 units. The actual fixed overhead cost was $74,000. The actual variable overhead cost was $100,000. Required: (1) Compute the variable overhead spending and efficiency variances. (2) Compute the fixed overhead spending and volume variances. (3) Prepare all the relevant journal entries (including the closing entry).

3. The practical capacity for a year is defined as 20,000 units requiring 25,000 direct labor hours. The total budgeted overhead cost is $170,000, of which the budgeted variable overhead cost is $95,000. The standard direct labor cost is $3 per direct labor hour. The labor efficiency variance is $2,625 favorable. The actual units produced are 18,500 units. The actual fixed overhead cost was $74,000. The actual variable overhead cost was $100,000. Required: (1) Compute the variable overhead spending and efficiency variances. (2) Compute the fixed overhead spending and volume variances. (3) Prepare all the relevant journal entries (including the closing entry).

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

3. The practical capacity for a year is defined as 20,000 units requiring 25,000 direct labor hours.
The total budgeted overhead cost is $170,000, of which the budgeted variable overhead cost is
$95,000. The standard direct labor cost is $3 per direct labor hour. The labor efficiency
variance is $2,625 favorable. The actual units produced are 18,500 units. The actual fixed
overhead cost was $74,000. The actual variable overhead cost was $100,000.
Required:
(1) Compute the variable overhead spending and efficiency variances.
(2) Compute the fixed overhead spending and volume variances.
(3) Prepare all the relevant journal entries (including the closing entry).

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