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 $$780,100$ and actual variable overhead costs of $$435,620$

Required:

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

$

per direct labor hour

Standard variable overhead rate

$

per direct labor hour

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

What is the total fixed overhead variance?

What is the total variable overhead variance?

:

:

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

Spending Variance

$

$$

Volume Variance

Compute the variable overhead spending and efficiency variances.

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

Variable overhead efficiency variance

Spending variance