Toronto Apparel Company, located in Ontario, Canada, 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. The standard variable-overhead rate is estimated to be $2 per machine hour or $6 per unit. The actual data for the year follow.

250,000 764,000 ACLUAIIV Ale CLOVE INE Clavtreun arereee ec ieee $1,700,000

$ 401,500 Required

a. Compute the following variances. Indicate whether each is favorable or unfavorable where appropriate.

(1) Variable-overhead spending variance.

(2) Variable-overhead efficiency variance.

(3) Fixed-overhead budget variance.

(4) Fixed-overhead volume variance.

b. Prepare journal entries to do the following:

Record the incurrence of actual variable overhead and actual fixed overhead.

Add variable and fixed overhead to Work-in-Process Inventory.

Close underapplied or overapplied overhead to Cost of Goods Sold.