Problem 15-45 Four-Variance Analysis; Journal Entries [LO 15-1, 15-2, 15-3, 15-4]

Edney Company employs a standard cost system for product costing. The per-unit standard cost of its product is:

Raw materials	$	14.50
Direct labor (2 direct labor hours $8.00 per hour)		16.00
Manufacturing overhead (2 direct labor hours $11.00 per hour)		22.00
Total standard cost per unit	$	52.50

The manufacturing overhead rate is based on a normal capacity level of 600,000 direct labor hours. (Normal capacity is defined as the level of capacity needed to satisfy average customer demand over a period of two to four years. Operationally, this level of capacity would take into consideration sales trends and both seasonal and cyclical factors affecting demand.) The firm has the following annual manufacturing overhead budget:

Variable	$	3,600,000
Fixed		3,000,000
	$	6,600,000

Edney incurred $433,350 in direct labor cost for 53,500 direct labor hours to manufacture 26,000 units in November. Other costs incurred in November include $260,000 for fixed manufacturing overhead and $315,000 for variable manufacturing overhead.

Required:

1. Determine each of the following for November. [Note: Indicate whether each variance is favorable (F) or unfavorable (U).]

a. The variable overhead spending variance.

b. The variable overhead efficiency variance.

c. The fixed overhead spending (budget) variance.

d. The fixed overhead production volume variance.

e. The total amount of under- or overapplied manufacturing overhead (i.e., the total manufacturing overhead cost variance for the period).

2. Prepare the following four journal entries: (a) to record actual variable overhead costs, (b) to record actual fixed overhead costs, (c) to record standard overhead costs applied to production, and (d) to record all four overhead cost variances. The company uses a single account, Factory Overhead, to record all overhead costs. Assume that the actual variable manufacturing overhead consists of utilities payable of $165,000, indirect materials of $100,000 (all materials, direct and indirect, are recorded in a single account, Materials Inventory), and $50,000 depreciation on factory equipment (determined under the units-of-production method). Assume that the fixed manufacturing overhead consists of accrued (i.e, unpaid) salaries of $60,000 and factory depreciation of $200,000. All unpaid salaries should be recorded in a single account, Accrued Payroll.

3. Prepare the appropriate journal entry to close all manufacturing overhead variances to the cost of goods sold (CGS) account. (Assume the cost variances you calculated above are for the year, not the month.)

So I have correct:

1a.) The variable OH spending variance $6,000 F

1b.) The variable OH efficiency variance $9,000 U

1c.) The fixed OH spending (budget) variance $10,000 U

1d.) The fixed OH production volume variance $10,000 F

1e.) The total amount of under-or-overapplied manufacturing OH $3,000 U

Transactions: for Prepare the following four journal entries: (a) to record actual variable overhead costs, (b) to record actual fixed overhead costs, (c) to record standard overhead costs applied to production, and (d) to record all four overhead cost variances. The company uses a single account, Factory Overhead, to record all overhead costs. Assume that the actual variable manufacturing overhead consists of utilities payable of $165,000, indirect materials of $100,000 (all materials, direct and indirect, are recorded in a single account, Materials Inventory), and $50,000 depreciation on factory equipment (determined under the units-of-production method). Assume that the fixed manufacturing overhead consists of accrued (i.e, unpaid) salaries of $60,000 and factory depreciation of $200,000. All unpaid salaries should be recorded in a single account, Accrued Payroll.

a.)	Factory Overhead	?
	Utilities payable		165,000
	materials inventory		100,000
	(Is supposed to be a entry here)		?
b	Factory Overhead	260,000
	Accumulated depreciation-factory		200,000
	accrued payroll		60,000
c	WIP-Inventory	Wrong I put 312,000
	Factory Overhead		wrong again I put 312,000
d	factory OH (wrong)	(wrong)260,000
	Fixed factory OH spending variance	10,000
	Production volume variance		10,000
	Factory OH		(wrong) 260,000
	missing an entry		missing a number

requirment #3

Prepare the appropriate journal entry to close all manufacturing overhead variances to the cost of goods sold (CGS) account. (Assume the cost variances you calculated above are for the year, not the month.)

a	Production volume variance	(wrong) 6,000
	Cost of goods sold (CGS)	(wrong) 10,000
	Variable OH spending variance	(wrong) 3,000
	variable OH efficiecny variance		9,000
	(wrong name) fixed factory OH spending Variance		10,000