Overhead Variances, Four-Variance Analysis, Journal Entries

Laughlin, Inc., uses a standard costing system. The predetermined overhead rates are calculated using practical capacity. Practical capacity for a year is defined as 1,000,000 units requiring 200,000 standard direct labor hours. Budgeted overhead for the year is $750,000, of which $300,000 is fixed overhead. During the year, 900,000 units were produced using 190,000 direct labor hours. Actual annual overhead costs totaled $800,000, of which $294,700 is fixed overhead.

Required:

3. Prepare the journal entries that reflect the following: a. Assignment of overhead to production b. Recognition of the incurrence of actual overhead c. Recognition of overhead variances d. Closing out overhead variances, assuming they are not material Note: Close the variances with a debit balance first. For compound entries, if an amount box does not require an entry, leave it blank or enter Work in Process 505,300 | Variable Overhead Control 505,300 | Fixed Overhead Control 800,000 | Variable Overhead Control Fixed Overhead Control Miscellaneous Accounts Fixed Overhead Volume Variance Variable Overhead Spending Variance Variable Overhead Efficiency Variance Fixed Overhead Spending Variance Fixed Overhead Control Variable Overhead Control C. d. Cost of Goods Sold 70,300 X Fixed Overhead Volume Variance Variable Overhead Spending Variance Variable Overhead Efficiency Varianc 30,000 X Fixed Overhead Spending Variance Cost of Goods Sold