P11.41 Comprehensive problem on overhead accounting under standard costing: publisher LO11.5 Reams Lid publishes textbooks. A monthly flexible overhead budget for the firm is as follows: 11.6 11.7 Reams Ltd Monthly flexible overhead budget Direct labour hours Budgeted costs 1500 1750 2 000 Variable costs Indirect material: Glue $ 750 $ 875 $ 1 000 Tape 300 350 400 Miscellaneous supplies 3 000 3 500 4 000 Indirect labour 7 500 8 750 10 000 Utilities: Electricity 1 500 1 750 2 000 Natural gas 450 525 600 Total variable cost $13 500 $15 750 $18 000 Fixed costs Supervisory labour $12 500 $12 500 $12 500 Depreciation 3 400 3 400 3 400 Property taxes and insurance 4 100 4 100 4 100 Total fixed cost $20 000 $20 000 $20 000 Total overhead cost $33 500 $35 750 $38 000 The planned monthly production is 6400 books. The standard direct labour allowance is 0.25 hours per book. During February, Reams produced 8000 books and used 2 100 direct labour hours. The actual overhead costs for the month were as follows: Actual variable overhead $19 530 Actual fixed overhead 37 600 Required: 1. Determine the formula flexible overhead budget for Reams. 2. Prepare a diagram similar to that in Exhibit 1 1.5 to show Reams' variable overhead variances for February. Indicate whether each variance is favourable or unfavourable. 3. Draw a graph to depict Reams' variable overhead variances for February (see Problem P 1 1.33, requirement 1). 4. Explain the meaning of each of the variances calculated in requirement 2. 5. Prepare a diagram similar to that in Exhibit 11.6 to show Reams' fixed overhead variances for February. 6. Draw a graph similar to that in Exhibit 1 1.7 to depict the company's applied and budgeted fixed overhead for February. Show the firm's February volume variance on the graph. 7. Interpret the variances calculated in requirement 5. B. Prepare journal entries to record each of the following: (a) incurrence of February's actual overhead cost (b) overhead variance for the month (c) application of February's overhead cost to work in process inventory