Schilling Company manufactures auto parts. The company installed a standard costing system to account for manufacturing costs.

Presented below are planned manufacturing data for 2020 and actual data for September 2020. The company applies overhead based upon machine hours. The denominator level of production (ie. the planned or expected level of production) is 3,800 units.

The standard cost card is as follows:

Direct materials                       4 pounds @ $5 per pound

Direct labor                             2 hours @ $15 per DLH

Variable overhead                    4 machine hours @ $10 per machine hour

Fixed overhead                        4 machine hours @ $12 per machine hour

During the year:

1. Actual production                           4,300 units
2. Materials purchased                     20,000 pounds at $4.75 per pound
3. Materials used                              16,000 pounds
4. Actual direct labor cost                  9,000 hours at $14.25 per DLH
5. Actual fixed overhead             $180,000
6. Actual variable overhead          $195,000
7. Actual machine hours used         16,250
8. All production was completed.
9. 4,000 units were sold for $280 each.
10. Selling expense was $4 per each unit sold plus an additional $123,000.
11. Record the net variance to cost of goods sold.

REQUIRED:

1. Journalize the above transactions (ie. items 2-6, 8-11).
2. Determine the eight production variances and indicated whether each is favorable or unfavorable.
3. Calculate the three-way and two-way variances.
4. Calculate actual operating income (ie. include the adjustment for variances).