49. (Four-variance approach; journal entries) Laramie Lumber produces picnic tables, swings, and benches and uses direct labor hours to apply overhead.

Standard hours allowed for each product are as follows:

Picnic table: 10 standard direct labor hours Swing: 3 standard direct labor hours Bench: 12 standard direct labor hours The standard variable overhead rate is $4 per direct labor hour; the standard fixed overhead application rate at expected annual capacity is $2 per direct labor hour. Expected capacity on a monthly basis is 3,000 direct labor hours.

Production for June 2001 was 100 picnic tables, 400 swings, and 60 benches.

Actual direct labor hours incurred were 3,020. Actual variable overhead was

$11,900, and actual fixed overhead was $6,100 for the month.

a. Prepare a variance analysis using the four-variance approach. (Hint: Convert the production of each type of product into standard hours allowed for all work accomplished for the month.)

b. Prepare journal entries for (1) incurring overhead costs, (2) applying overhead costs, and (3) closing the variance accounts (assume immaterial variances).

c. Evaluate the effectiveness of managers in controlling costs.