HighTech Co. manufactures a control valve used in sophisticated machinery. The firm uses a standard costing system and develop its overhead application rate based on machine hours. The planned output for the year 201x is 72,000 units requiring 360,000 machine hours. The company is able to schedule production uniformly throughout the year. It turns out that a total of 6,600 valves requiring 31,500 machine hours were actually produced in March 201x. Appended below is a performance report on factory overhead and other production data prepared by the firms new accounts assistant Soo Mes Sih for March 201x:

Upon receiving the report, the company CEO commented: Although the figures in the report looks like they were calculated correctly, the production supervisors suspect that the reported variances might not accurately reflect the companys operations.

Required: (i) Prepare a revised performance report on factory overhead that would more accurately evaluate the control of overhead costs in March, by filling the shaded cells in the template provided.

(ii) Prepare an analysis of variable overhead variances by filling the shaded cells in the template provided. (iii) Prepare an analysis of fixed overhead variances by filling the shaded cells.

(iv) Prepare journal entries (narrations are not necessary) to record the following: (1) The incurrence of factory overhead (in total) in March 201x. (2) The application of factory overhead (in total) to work in process inventory in March 201x. (3) Factory overhead variances.

Performance Report on Factory Overhead for March 201x: Actual Cost incurred in March MonthlyFlexible Budget at Budget at 36,000 30,000 Variances Indirect materials Indirect labor Maintenance 11,100 8,400 5,560 5,250 5,400 8,400 10,200 7,500 5,100 5,400 4,500 8,400 12,240 9,000 6,120 5,400 4,500 8,400 900 U 900 U 460 U 150 F 900 U Utilities Depreciation U: Unfavourable: F: Favourable Other Planned yearl Planned yearly machine hours required Actual production in March Actual machine hours used Data 72,000 units 360,000 machine hours 6,600 units 31 hours