Chapter 11, Problem 50P

Montreal Scholastic Supply Company uses a standard-costing system. The firm estimates that it will operate its manufacturing facilities at 800,000 machine hours for the year. The estimate for total budgeted overhead is $2,000,000. The standard variable-overhead rate is estimated to be $2 per machine hour or $6 per unit. The actual data for the year are presented below.

Required:

1. 1. Compute the following variances. Indicate whether each is favorable or unfavorable, where appropriate.
   1. a.      Variable-overhead spending variance.
   2. b.      Variable-overhead efficiency variance.
   3. c.       Fixed-overhead budget variance.
   4. d.      Fixed-overhead volume variance.
2. 2. Prepare journal entries to
   • Record the incurrence of actual variable overhead and actual fixed overhead.
   • Add variable and fixed overhead to Work-in-Process Inventory.
   • Close underapplied or overapplied overhead into Cost of Goods Sold.