1. Compute the variable overhead spending and efficiency variances.

a. Journalize the actual incurring of variable overhead and variable overhead variances.

b. Apply variable overhead

c. Record variances and close

2. Compute the fixed overhead spending and volume variances.

a. Journalize the actual incurring of fixed overhead and fixed overhead variances.

b. Apply fixed overhead

c. Record variances and close

MISSOURI CORP. ...... manufactures widgets. The materials used for the widgets are inexpensive, but the process is very labor intensive... The supervisor decided to use cheaper labor this period to see whether costs could be reduced. You have been asked to prepare a report about how effective operations had been during the month of October. The following standards have been established in connection with the production of one widget (standard costs per unit): Cost per unit Direct materials 3 lbs. @ $12 per lb. $36 Direct labor 5 hrs @ $15 per hr $75 Factory overhead: Variable $3 per direct labor hr $15 Fixed $4 per direct labor hr ($20 per unit) $20 $146 Overhead (fixed and variable) is applied on the basis of direct labor hours. Estimated production for the month was 8,000 widgets, or 40,000 labor hours... During October, the company actually produced 7,800 widgets and the records showed the following: Direct materials purchased 23,100 lbs @ $12.60 Direct materials used 23,100 lbs @ Direct labor 40,100 hours @ $14.60 Variable overhead $119,000 Fixed overhead $180,000 Note: The quantity purchased was exactly equal to the quantity used. The company's policy is to record direct materials price variances at the time the materials are purchased