ABC 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 +(STT*10). The standard variable-overhead rate is estimated to be $2 per machine hour or $6 per unit. The actual data for the year are presented below.
Actual finished units
250,000
Actual machine hours
764,000
Actual variable overhead ($)
1,705,000
Actual fixed overhead ($)
402,000
Required:
Compute the following variances. Indicate whether each is favorable or unfavorable, where appropriate.
1) Variable-overhead spending variance,Variable-overhead efficiency variance, Fixed-overhead budget variance, Fixed-overhead volume variance.
Prepare journal entries to :
2) Record the incurrence of actual variable overhead and actual fixed overhead.
3) Add variable and fixed overhead to Work-in-Process Inventory.