Chapter 8, Problem 8.27E

Straightforward 4-variance overhead analysis. The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 6 machine hours of variable manufacturing overhead at $8 per hour and 6 machine-hours of fixed manufacturing overhead at $15 per hour. Actual output produced was 4,400 units. Variable manufacturing overhead incurred was $245,000. Fixed manufacturing overhead incurred was $373,000. Actual machine-hours were 28,400.

1. A. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis in Figure 8-4 (page 304).

  Required

1. B. Prepare journal entries using the 4-variance analysis.
2. C. Describe how individual fixed manufacturing overhead items are controlled from day to day.
3. D. Discuss possible causes of the fixed manufacturing overhead variances.