limpton 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	446,000*
*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 $437,540.

Required:

Question Content Area

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	3.85	per direct labor hour
Standard variable overhead rate	2.23	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 2b96b00b6ffffde_3
Variable	$fill in the blank 2b96b00b6ffffde_4

What is the total fixed overhead variance? $fill in the blank 2b96b00b6ffffde_5

FavorableUnfavorableUnfavorable

What is the total variable overhead variance? $fill in the blank 2b96b00b6ffffde_7

FavorableUnfavorableUnfavorable

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

Spending Variance	10,100	Unfavorable
Volume Variance	23,100	Unfavorable

4. Compute the variable overhead spending and efficiency variances.

Spending Variance	$fill in the blank 2b96b00b6ffffde_13	FavorableUnfavorableUnfavorable
Efficiency Variance	$fill in the blank 2b96b00b6ffffde_15	FavorableUnfavorableUnfavorable

5. Now assume that Plimpton's 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 2b96b00b6ffffde_17	FavorableUnfavorableUnfavorable
Variable overhead efficiency variance	$fill in the blank 2b96b00b6ffffde_19	FavorableUnfavorableUnfavorable
Spending variance	$fill in the blank 2b96b00b6ffffde_21	FavorableUnfavorableUnfavorable

Feedback Area

Feedback

1. Standard Fixed OH rate = fixed OH (production volume x direct labor hours given) Standard variable OH rate = Variable OH production hours

2. Total Fixed OH variance = Actual fixed OH Applied fixed OH Total variable OH variance = Actual variable OH (Variable OH rate x Standard hours for actual production)

3. Fixed OH spending variance = AFOH - BFOH Volume variance = Budgeted fixed OH Applied fixed OH

4. Variable overhead spending variance = (Actual variable OH rate (AVOR) (SVOR) Standard variable OH rate) x AH Variable overhead efficiency variance = (AH SH) x SVOR

Question Content Area

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.

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 -