Question
P 11.34 Overhead variances; journal entries; closing variance accounts: manufacturer Broome Instruments Company manufactures a control valve used in air-conditioning systems. costing. The firm uses
P 11.34 Overhead variances; journal entries; closing variance accounts: manufacturer | ||||||||
Broome Instruments Company manufactures a control valve used in air-conditioning systems. costing. | ||||||||
The firm uses a standard costing system for product | ||||||||
The manufacturing overhead rate is based on a normal annual activity level of 600,000 machine hours. | ||||||||
The company planned to produce 25,000 units each month during the current year. The budgeted manufacturing overhead for the current year is as follows: | ||||||||
Variable | $3,600,000 | |||||||
Fixed | $3,000,000 | |||||||
Total | $6,600,000 | |||||||
During November, the company produced 26,000 units and used 53500 machine hours. | ||||||||
Actual manufacturing overhead for the month was $260,000 fixed and $320,000 variable. | ||||||||
The total manufacturing overhead applied during November was $572,000 | ||||||||
The standard cost of a control valve is as follows: | ||||||||
Direct material | $14.50 | |||||||
Direct labour ( 2hours x $25) | $50 | |||||||
Manufacturing overhead (2 hours x $11) | $22 | |||||||
Total standard cost | $86.50 |
Please show all 4 variance analysis work formula easy to understand for question 1 how you get fav or unfav
For example. instead of using this formula actual variable overhead (AH xSVR) show the formula to understand how to get fav or unfavourable answer.
spending variance =actual quantity x actual oh rate , actual quantity x standard oh rate
efficiency variance= actual quantity x standard oh rate , standard quantity x standard Oh rate
1. indicating whether each variance is favourable or unfavourable
variable overhead spending variance
variable overhead efficiency variance
fixed overhead budget variance
fixed overhead volume variance
2. prepare journal entries to add manufacturing overhead to work in process inventory and to record variances and actual overhead costs
3. construct an Excel spreadsheet to solve requirement 1. Demonstrate how the solution would change if the manufacturing overhead rate was $13 and the actual fixed manufacturing overhead was $280,000.
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