1. eBook

   Overhead Application, Overhead Variances, Journal Entries

   Plimpton Company produces countertop ovens. Plimpton uses a standard costing system. The standard costing system relies on direct labor hours to assign overhead costs to production. The direct labor standard indicates that two direct labor hours should be used for every oven produced. The normal production volume is 100,000 units. The budgeted overhead for the coming year is as follows:

   Fixed overhead	$770,000
   Variable overhead	444,000*
   *At normal volume.

   Plimpton applies overhead on the basis of direct labor hours.

   During the year, Plimpton produced 97,000 units, worked 196,000 direct labor hours, and incurred actual fixed overhead costs of $780,100 and actual variable overhead costs of $435,600.

   Required:

   1. Calculate the standard fixed overhead rate and the standard variable overhead rate. Round your answers to the nearest cent. Use rounded answers in the subsequent computations.

   Standard fixed overhead rate	$fill in the blank b6351203003006e_1	per direct labor hour
   Standard variable overhead rate	$fill in the blank b6351203003006e_2	per direct labor hour

   2. Compute the applied fixed overhead and the applied variable overhead. Use the application rates from part (1) in your calculations.

   Fixed	$fill in the blank b6351203003006e_3
   Variable	$fill in the blank b6351203003006e_4

   What is the total fixed overhead variance? $fill in the blank b6351203003006e_5

   FavorableUnfavorable

   What is the total variable overhead variance? $fill in the blank b6351203003006e_7

   FavorableUnfavorable

   3. Break down the total fixed overhead variance into a spending variance and a volume variance.

   Spending Variance	$fill in the blank b6351203003006e_9	FavorableUnfavorable
   Volume Variance	$fill in the blank b6351203003006e_11	FavorableUnfavorable

   4. Compute the variable overhead spending and efficiency variances.

   Spending Variance	$fill in the blank b6351203003006e_13	FavorableUnfavorable
   Efficiency Variance	$fill in the blank b6351203003006e_15	FavorableUnfavorable

   5. Now assume that Plimptons cost accounting system reveals only the total actual overhead. In this case, a three-variance analysis can be performed. Using the relationships between a three- and four-variance analysis, indicate the values for the three overhead variances.

   Volume variance	$fill in the blank b6351203003006e_17	FavorableUnfavorable
   Variable overhead efficiency variance	$fill in the blank b6351203003006e_19	FavorableUnfavorable
   Spending variance	$fill in the blank b6351203003006e_21	FavorableUnfavorable

   6. Prepare journal entries (1) to apply overhead to production, (2) to record the actual overhead costs incurred, (3) to record the variable and fixed overhead variances, and (4) to close the variance accounts at the end of the year. Assume variances are closed to Cost of Goods Sold. If an amount box does not require an entry, leave it blank or enter "0".

   1.	Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceVarious AccountsVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead Spending VarianceFixed Overhead Volume VarianceVarious AccountsVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlVarious AccountsVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   2.	Cost of Goods SoldVarious AccountsVariable Overhead ControlVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceVarious AccountsVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceVarious AccountsVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   3.	CashFixed Overhead ControlFixed Overhead Spending VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
   	CashCost of Goods SoldFixed Overhead Volume VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Efficiency VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead Efficiency VarianceVariable Overhead Spending Variance	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead Volume VarianceVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   4.	Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceFixed Overhead Volume VarianceVarious AccountsVariable Overhead ControlVariable Overhead Efficiency VarianceVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlFixed Overhead Spending VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlFixed Overhead Volume VarianceVariable Overhead ControlWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Spending VarianceWork in Process	- Select -	- Select -
   	Cost of Goods SoldFixed Overhead ControlVariable Overhead ControlVariable Overhead Efficiency VarianceWork in Process	- Select -	- Select -

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