The Hill Manufacturing Company applies fixed manufacturing overhead at the rate of ($5.50) per direct labor hour.

Question:

The Hill Manufacturing Company applies fixed manufacturing overhead at the rate of \($5.50\) per direct labor hour. Fixed manufacturing overhead is budgeted to be \($330,000\) per month. The direct labor efficiency standard is five hours per finished unit. Although budgeted production for the month was 12,000, the company only produced 11,800 units.

Production required actual direct labor hours of 60,000 and actual fixed manufacturing overhead cost incurred was $325,000.

Required:

a. Determine the fixed overhead budget variance.

b. What is the difference between the planned number of units and the number of units actually produced?

c. Determine the fixed manufacturing overhead volume variance.

d. Appendix: Prepare the following journal entries:

1. Record the actual fixed manufacturing overhead. (Use “various accounts” for the credit side of the entry.)

2. Record the fixed manufacturing overhead applied to production.

3. Close the fixed manufacturing overhead accounts and establish the fixed overhead variance accounts.

4. Close the variance accounts to cost of goods sold.

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