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James Corp. applies overhead on the basis of direct labor hours. For the month of May, the company planned production of 8,400 units (80% of its production capacity of 10,500 units) and prepared the following overhead budget:

Operating LevelsOverhead Budget80%Production in units8,400Standard direct labor hours21,000Budgeted overheadVariable overhead costsIndirect materials$12,600Indirect labor21,000Power8,400Maintenance4,200Total variable costs46,200Fixed overhead costsRent of factory building17,000DepreciationMachinery10,200Supervisory salaries19,000Total fixed costs46,200Total overhead costs$92,400

During May, the company operated at 90% capacity (9,450 units) and incurred the following actual overhead costs:

Overhead costs (actual)Indirect materials$12,600Indirect labor23,425Power9,450Maintenance5,330Rent of factory building17,000DepreciationMachinery10,200Supervisory salaries21,800Total actual overhead costs$99,805

1.Compute the overhead controllable variance and classify it as favorable or unfavorable.

2.Compute the overhead volume variance and classify it as favorable or unfavorable.

3.Prepare an overhead variance report at the actual activity level of 9,450 units.

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Hart Company made 3,300 bookshelves using 22,300 board feet of wood costing $303,280. The company's direct materials standards for one bookshelf are 8 board feet of wood at $13.50 per board foot.

AQ = Actual Quantity

SQ = Standard Quantity

AP = Actual Price

SP = Standard Price

(1)Compute the direct materials price and quantity variances and classify each as favorable or unfavorable.

(2)Hart applies management by exception by investigating direct materials variances of more than 5% of actual direct materials costs. Which direct materials variances will Hart investigate further?

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Hart Company made 3,300 bookshelves using 22,300 board feet of wood costing $303,280. The company's direct materials standards for one bookshelf are 8 board feet of wood at $13.50 per board foot.

Hart Company uses a standard costing system.

(1)What is the journal entry to charge direct materials costs to Work in Process Inventory and record the materials variances.

(2)Assume that Hart's materials variances are the only variances accumulated in the accounting period and that they are immaterial. Prepare the adjusting journal entry to close the variance accounts at period-end.

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Sedona Company set the following standard costs for one unit of its product for this year.

Direct material (15 Ibs. @ $4.20 per Ib.)$63.00Direct labor (10 hrs. @ $6.40 per hr.)64.00Variable overhead (10 hrs. @ $3.70 per hr.)37.00Fixed overhead (10 hrs. @ $1.50 per hr.)15.00Total standard cost$179.00

The $5.20 ($3.70 + $1.50) total overhead rate per direct labor hour is based on an expected operating level equal to 65% of the factory's capacity of 67,000 units per month. The following monthly flexible budget information is also available.

Operating Levels (% of capacity)Flexible Budget60%65%70%Budgeted output (units)40,20043,55046,900Budgeted labor (standard hours)402,000435,500469,000Budgeted overhead (dollars)Variable overhead$1,487,400$1,611,350$1,735,300Fixed overhead653,250653,250653,250Total overhead$2,140,650$2,264,600$2,388,550

During the current month, the company operated at 60% of capacity, employees worked 382,000 hours, and the following actual overhead costs were incurred.

Variable overhead costs$1,425,000Fixed overhead costs725,250Total overhead costs$2,150,250

[The following information applies to the questions displayed below.]

Sedona Company set the following standard costs for one unit of its product for this year.

Direct material (15 Ibs. @ $4.20 per Ib.)$63.00Direct labor (10 hrs. @ $6.40 per hr.)64.00Variable overhead (10 hrs. @ $3.70 per hr.)37.00Fixed overhead (10 hrs. @ $1.50 per hr.)15.00Total standard cost$179.00

The $5.20 ($3.70 + $1.50) total overhead rate per direct labor hour is based on an expected operating level equal to 65% of the factory's capacity of 67,000 units per month. The following monthly flexible budget information is also available.

Operating Levels (% of capacity)Flexible Budget60%65%70%Budgeted output (units)40,20043,55046,900Budgeted labor (standard hours)402,000435,500469,000Budgeted overhead (dollars)Variable overhead$1,487,400$1,611,350$1,735,300Fixed overhead653,250653,250653,250Total overhead$2,140,650$2,264,600$2,388,550

During the current month, the company operated at 60% of capacity, employees worked 382,000 hours, and the following actual overhead costs were incurred.

Variable overhead costs$1,425,000Fixed overhead costs725,250Total overhead costs$2,150,250

AH = Actual Hours

SH = Standard Hours

AVR = Actual Variable Rate

SVR = Standard Variable Rate

1.Compute thevariable overhead spending and efficiency variances.

2.Compute the fixed overhead spending and volume variances and classify each as favorable or unfavorable.

3.Compute the controllable variance.