College Memories, Inc. publishes college yearbooks. A monthly flexible overhead budget for the firm follows.

The planned monthly production is 6,400 yearbooks. The standard direct-labor allowance is .25 hour per book and overhead is budgeted and applied on the basis of direct-labor hours. During February, College Memories, Inc. produced 8,000 yearbooks and actually used 2,100 direct-labor hours. The actual overhead costs for the month were as follows:

Actual variable overhead ................................................................................................................................... $19,530 Actual fixed overhead ........................................................................................................................................ 37,600 Required:
1. Determine the formula-style flexible overhead budget for College Memories, Inc.
2. Prepare a display similar to Exhibit 11–6, which shows College Memories’ variable-overhead variances for February. Indicate whether each variance is favorable or unfavorable.
3. Draw a graph similar to Exhibit 11–7, which shows College Memories’ variable-overhead variances for February.
4. Interpret each of the variances computed in requirement (2).
5. Prepare a display similar to Exhibit 11–8, which shows College Memories’ fixed-overhead variances for February.
6. Draw a graph similar to Exhibit 11–9, which depicts the company’s applied and budgeted fixed overhead for February. Show the firm’s February volume variance on the graph.
7. Interpret each of the variances computed in requirement (5).
8. Prepare journal entries to record each of the following:
• Incurrence of February’s actual overhead cost.
• Application of February’s overhead cost to Work-in-Process Inventory.
• Close underapplied or overapplied overhead into Cost of Goods Sold.
9. Draw T-accounts for all of the accounts used in the journal entries of requirement (8). Then post the journal entries to the T-accounts.

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Budgeted Cost Variable costs: Indirect material: COLLEGE MEMORIES, INC. Monthly Flexible Overhead Budget Direct-Labor Hours 1,500 1,750 2,000 Glue Tape Miscellaneous supplies. Indirect labor Utilities: $ 750 $ 875 $ 1,000 300 350 400 3,000 3,500 4,000 7,500 8,750 10,000 Electricity Natural gas Total variable cost 1,500 1,750 2,000 450 525 600 $13,500 $15,750 $18,000 Fixed costs: Supervisory labor 12,500 12,500 12,500 Depreciation 3,400 3,400 3,400 Property taxes and insurance 4,100 4,100 4,100 Total fixed cost. $20,000 $20,000 $20,000 Total overhead cost $33,500 $35,750 $38,000