Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 53,100 machine hours per year, which represents 26,550 units of output. Annual budgeted fixed overhead costs are $265,500 and the budgeted variable overhead cost rate is $3.00 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,500 units, which took 42,100 machine hours. Actual fixed overhead costs for the year amounted to $259,400 while the actual variable overhead cost per unit was $2.90. Required information a. Based on the information provided above, what was the variable overhead spending variance for the year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) b. What was the variable overhead efficiency variance for the year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) Based on the information provided above, provide the correct summary journal entries for actual and applied overhead costs (both variable and fixed) for the year. Assume that the company uses a single account, Factory Overhead, to record both actual and applied overhead. Also, assume that the only variable overhead cost was electricity and that actual fixed overhead consisted of depreciation of $161,000 and supervisory salaries of $96,100. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.). Transaction General Journal Factory (or, manufacturing) overhead Accumulated depreciation-factory Salaries payable Utilities payable No 1 1 1 1 2 2 1 2 Work in process inventory Factory (or, manufacturing) overhead Debit Credit
Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 53,100 machine hours per year, which represents 26,550 units of output. Annual budgeted fixed overhead costs are $265,500 and the budgeted variable overhead cost rate is $3.00 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,500 units, which took 42,100 machine hours. Actual fixed overhead costs for the year amounted to $259,400 while the actual variable overhead cost per unit was $2.90. Required information a. Based on the information provided above, what was the variable overhead spending variance for the year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) b. What was the variable overhead efficiency variance for the year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.) Based on the information provided above, provide the correct summary journal entries for actual and applied overhead costs (both variable and fixed) for the year. Assume that the company uses a single account, Factory Overhead, to record both actual and applied overhead. Also, assume that the only variable overhead cost was electricity and that actual fixed overhead consisted of depreciation of $161,000 and supervisory salaries of $96,100. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.). Transaction General Journal Factory (or, manufacturing) overhead Accumulated depreciation-factory Salaries payable Utilities payable No 1 1 1 1 2 2 1 2 Work in process inventory Factory (or, manufacturing) overhead Debit Credit
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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Transcribed Image Text:Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 53,100 machine hours per year, which represents 26,550
units of output. Annual budgeted fixed overhead costs are $265,500 and the budgeted variable overhead cost rate is $3.00 per unit. Factory overhead costs are applied on the basis of standard
machine hours allowed for units produced. Budgeted and actual output for the year was 20,500 units, which took 42,100 machine hours. Actual fixed overhead costs for the year amounted to
$259,400 while the actual variable overhead cost per unit was $2.90.
Required information
a. Based on the information provided above, what was the variable overhead spending variance for the year? (Do not round intermediate calculations. Round your final answer to nearest whole
dollar amount.)
b. What was the variable overhead efficiency variance for the year? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)
Based on the information provided above, provide the correct summary journal entries for actual and applied overhead costs (both variable and fixed) for the year. Assume that the company uses a
single account, Factory Overhead, to record both actual and applied overhead. Also, assume that the only variable overhead cost was electricity and that actual fixed overhead consisted of
depreciation of $161,000 and supervisory salaries of $96,100. (Do not round intermediate calculations. Round your final answers to nearest whole dollar amount. If no entry is required for a
transaction/event, select "No journal entry required" in the first account field.).
Transaction
General Journal
Factory (or, manufacturing) overhead
Accumulated depreciation-factory
Salaries payable
Utilities payable
No
1
1
1
1
2
2
1
2
Work in process inventory
Factory (or, manufacturing) overhead
Debit
Credit
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