Chapter 11, Problem 51P

College Memories, Inc. publishes college yearbooks. A monthly flexible overhead budget for the firm follows.

The planned monthly production is 6,400 yearbooks. The standard direct-labor allowance is .25 hour per book and overhead is budgeted and applied on the basis of direct-labor hours. During February, College Memories, Inc. produced 8.000 yearbooks and actually used 2,100 direct-labor hours. The actual overhead costs for the month were as follows:

Required:

1. 1. Determine the formula-style flexible overhead budget for College Memories. Inc.
2. 2. Prepare a display similar to Exhibit 11–6, which shows College Memories’ variable-overhead variances for February. Indicate whether each variance is favorable or unfavorable.
3. 3. Draw a graph similar to Exhibit 11–7, which shows College Memories’ variable-overhead variances for February.
4. 4. Interpret each of the variances computed in requirement (2).
5. 5. Prepare a display similar to Exhibit 11–8, which shows College Memories’ fixed-overhead variances for February.
6. 6. Draw a graph similar to Exhibit 11–9, which depicts the company’s applied and budgeted fixed overhead for February. Show the firm’s February volume variance on the graph.
7. 7. Interpret each of the variances computed in requirement (5).
8. 8. Prepare journal entries to record each of the following:
   • Incurrence of February’s actual overhead cost.
   • Application of February’s overhead cost to Work-in-Process Inventory.
   • Close underapplied or overapplied overhead into Cost of Goods Sold.
9. 9. Draw T-accounts for all of the accounts used in the journal entries of requirement (8). Then post the journal entries to the T-accounts.