One division of Heartwood Cabinets anticipates the following costs for the next year: Cost Budget Facilities rent $ 72,000 Utilities $ 28,000 Taxes $ 17,000 Wages for production workers $ 555,000 Management salaries and benefits $ 320,000 Wages for shipping and handling workers $ 256,000 Direct materials for cabinets $ 350,000 Supplies $ 38,000 Indirect materials $ 120,000 Equipment rental $ 32,000 Advertising $ 25,000 Repairs and maintenance $ 36,000 Travel $ 95,000 The company uses machine hours as the sole cost driver of variable overhead. Based on prior years, Heartwood estimates it will take 0.30 of machine hours per cabinet produced. Budgeted output is 75,000 cabinets. Actual output is 73,000 cabinets and it really takes 0.40 machine hours to produce one cabinet. Actual variable overhead costs are $474,500. Actual fixed overhead costs are $600,000. Required: Calculate budgeted variable overhead for the year. Calculate the variable overhead spending variance. Calculate the variable overhead efficiency variance. Calculate the fixed overhead spending variance. Calculate the production-volume variance. Prepare journal entries to record the variable overhead variances. Prepare journal entries to record the fixed overhead variances.

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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Question

One division of Heartwood Cabinets anticipates the following costs for the next year:

Cost	Budget
Facilities rent	$ 72,000
Utilities	$ 28,000
Taxes	$ 17,000
Wages for production workers	$ 555,000
Management salaries and benefits	$ 320,000
Wages for shipping and handling workers	$ 256,000
Direct materials for cabinets	$ 350,000
Supplies	$ 38,000
Indirect materials	$ 120,000
Equipment rental	$ 32,000
Advertising	$ 25,000
Repairs and maintenance	$ 36,000
Travel	$ 95,000

The company uses machine hours as the sole cost driver of variable overhead. Based on prior years, Heartwood estimates it will take 0.30 of machine hours per cabinet produced. Budgeted output is 75,000 cabinets. Actual output is 73,000 cabinets and it really takes 0.40 machine hours to produce one cabinet. Actual variable overhead costs are $474,500. Actual fixed overhead costs are $600,000.