Patel and Sons, Inc., uses a standard cost system to apply overhead costs to units produced. Practical capacity for the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed overhead costs are $250,000 and the budgeted variable overhead cost rate is $4 per unit. Factory overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed overhead costs for the year amounted to $245,000 while the actual variable overhead cost per unit was $3.90.

1.

Based on the information provided above, provide the correct summary journal entries for actual and applied overhead costs (both variable and fixed) for the year. Assume that the company uses a single account, Factory Overhead, to record both actual and applied overhead. Also, assume that the only variable overhead cost was electricity and that actual fixed overhead consisted of depreciation of $150,000 and supervisory salaries of $95,000.

2. Based on the information provided above, provide the appropriate journal entries: (a) to record the overhead cost variances for the period (thereby closing out the balance in the Factory Overhead account), and (b) to close the variance accounts to the CGS account at the end of the period.