The Terry Company manufactures a commercial solvent that is used for industrial maintenance.

ANALYSIS OF This solvent is sold by the drum and generally has a stable selling price. Owing to a decrease in FACTORY demand for this product, Terry produced and sold 60,000 drums in December 19XX, which is OVERHEAD AND 50% of normal capacity.

JOURNAL ENTRIES The following information is available regarding Terry’s operations for the month of December: mk5

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1 Standard costs per drum of solvent manufactured were as follows: Direct materials Direct labor (1 hour). Factory overhead (fixed) per direct labor hour. Factory overhead (variable) per direct labor hour 2 Costs incurred during December were as follows: Direct labor: 65,000 hours were worked at a total cost of Factory overhead: Depreciation of building and machinery (fixed) Supervision and indirect labor (semivariable). Other factory overhead (variable).. Total factory overhead $21 7 4 ..... $470,000 $230,000 360,000 76,500 $666,500 3 The fixed factory overhead budget for the December level of production was $275,000. Required: Compute the factory overhead variances using the three-factor analysis method and journalize the above. (AICPA Adapted.)