(Four-variance approach; journal entries) For 1996, Phelps Manufacturing has set 120,000 direct labor hours as the annual capacity measure for computing its predetermined variable overhead rate. At that level, budgeted variable overhead costs are $540,000. The company has decided to apply fixed overhead on the basis of machine hours. Total budgeted annual machine hours are 6,600 and annual budgeted fixed overhead is $118,800. Both machine hours and fixed over¬ head costs are expected to be incurred evenly each month.

During March 1996, Phelps incurred 9,800 direct labor hours and 500 ma¬ chine hours. Variable and fixed overhead were, respectively, $42,350 and $10,500. The standard times allowed for March production were 9,910 direct labor hours and 480 machine hours.

a. Using the four-variance approach, determine the overhead variances for March 1996.

b. Prepare all journal entries for Phelps Manufacturing for March 1996.

LO1