Four OH variances; journal entries Kemp Manufacturing set 42,000 direct labor hours as the annual capacity measure for computing its predetermined variable overhead rate. At that level, budgeted variable overhead costs are $189,000. Kemp will apply budgeted fixed overhead of $84,240 on the basis of 2,340 budgeted machine hours for the year. Both machine hours and fixed overhead costs are expected to be incurred evenly each month. During March, Kemp incurred 3,540 direct labor hours and 180 machine hours. Actual variable and fixed overhead were $15,795 and $6,840, respectively. The standard times allowed for March production were 3,588 direct labor hours and 174 machine hours. a. Using the four-variance approach, determine the overhead variances for March. Note: Do not use negative signs with your answers. VOH Spending Variance Actual VOH - Budgeted VOH = VOH Spending Variance Answer - Answer = Answer AnswerFUNeither F or U VOH Efficiency Variance Budgeted VOH - Applied VOH = VOH Efficiency Variance Answer - Answer = Answer AnswerFUNeither F or U FOH Spending Variance Actual FOH - Budgeted FOH = FOH Spending Variance - Answer = Answer AnswerFUNeither F or U FOH Volume Variance Budgeted FOH - Applied FOH = FOH Volume Variance - = b . Prepare all journal entries related to overhead for Kemp Manufacturing for March.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Four OH variances;
Kemp Manufacturing set 42,000 direct labor hours as the annual capacity measure for computing its predetermined variable
During March, Kemp incurred 3,540 direct labor hours and 180 machine hours. Actual variable and fixed overhead were $15,795 and $6,840, respectively. The standard times allowed for March production were 3,588 direct labor hours and 174 machine hours.
a. Using the four-variance approach, determine the overhead variances for March.
Note: Do not use negative signs with your answers.
VOH Spending Variance | |||||
---|---|---|---|---|---|
Actual VOH | - | Budgeted VOH | = | VOH Spending Variance | |
Answer | - | Answer | = | Answer | AnswerFUNeither F or U |
VOH Efficiency Variance | |||||
---|---|---|---|---|---|
Budgeted VOH | - | Applied VOH | = | VOH Efficiency Variance | |
Answer | - | Answer | = | Answer | AnswerFUNeither F or U |
FOH Spending Variance | |||||
---|---|---|---|---|---|
Actual FOH | - | Budgeted FOH | = | FOH Spending Variance | |
- | Answer | = | Answer | AnswerFUNeither F or U |
FOH Volume Variance | |||||
---|---|---|---|---|---|
Budgeted FOH | - | Applied FOH | = | FOH Volume Variance | |
- | = |
b . Prepare all journal entries related to overhead for Kemp Manufacturing for March.
Note: Record any multiple debits or any multiple credits in alphabetical order by account name.
Account | Debit | Credit |
---|---|---|
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
To record actual overhead cost for March | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
To apply overhead to work in process for March | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
To record variable overhead variances for March | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
AnswerCost of Good SoldFixed Manufacturing Overhead ControlFixed Manufacturing Overhead Spending VarianceVariable Manufacturing Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceVarious accountsVolume VarianceWork in Process Inventory | ||
To record fixed overhead variances for March |
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