The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 3,600 output units per year, included 5 machine-hours of variable manufacturing overhead at $8 per hour and 5 machine-hours of fixed manufacturing overhead at $17 per hour. Actual output produced was 4,200 units. Variable manufacturing overhead incurred was $260,000. Fixed manufacturing overhead incurred was $380,000. Actual machine-hours were 28,400. Read the requirements. Requirement 1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis. Begin by calculating the following amounts for the variable overhead. Actual Input Allocated Actual Costs Incurred Flexible Budget Budgeted Rate Overhead Variable OH X Requirements Now complete the table below for the fixed manufacturing overhead. Same Budgeted Lump Sum Regardless of Output Level 2. Actual Costs Incurred Flexible Budget Allocated Overhead Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis. Prepare journal entries using the 4-variance analysis. Describe how individual fixed manufacturing overhead items are controlled from day to day. Discuss possible causes of the fixed manufacturing overhead variances. Fixed OH 4. Now complete the 4-variance analysis using the amounts you calculated above. (If no variance exists, leave the dollar value blank. Label the variance as favorable (F), unfavorable (U) or never a variance (N).) Print Done Spending Variance Efficiency Variance Production-Volume Variance 4-Variance Analysis Variable OH Fixed OH Requirement 2. Prepare journal entries using the 4-variance analysis. Record the actual variable manufacturing overhead incurred. (Record debits first, then credits. Exclude explanations from any journal entries.) Journal Entry Date Accounts Debit Credit Record the variable manufacturing overhead allocated. Journal Entry Date Accounts Debit Credit Record the variable manufacturing overhead variances for the period. Journal Entry Date Accounts Debit Credit Record the actual fixed overhead costs incurred. Journal Entry Date Accounts Debit Credit Record the fixed overhead costs allocated. Journal Entry Date Accounts Debit Credit Record the fixed overhead variances for the period. Journal Entry Accounts Date Debit Credit Requirement 3. Describe how individual fixed manufacturing overhead items are controlled from day to day. Individual fixed manufacturing overhead items are affected very much by day-to-day control. They are controlled Requirement 4. Discuss possible causes of the fixed manufacturing overhead variances. The fixed overhead V variance is caused by the actual realization of fixed costs differing from the budgeted amounts. In this example, the variance is , so actual FOH is the budgeted amount of FOH. The fixed overhead from expected levels, or if there are problems with production. Over capacity is usually driven by variance is caused by production being over or under expected capacity. You may be under capacity when demand y. The fact that there is a variance indicates that The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 3,600 output units per year, included 5 machine-hours of variable manufacturing overhead at $8 per hour and 5 machine-hours of fixed manufacturing overhead at $17 per hour. Actual output produced was 4,200 units. Variable manufacturing overhead incurred was $260,000. Fixed manufacturing overhead incurred was $380,000. Actual machine-hours were 28,400. Read the requirements. Requirement 1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis. Begin by calculating the following amounts for the variable overhead. Actual Input Allocated Actual Costs Incurred Flexible Budget Budgeted Rate Overhead Variable OH X Requirements Now complete the table below for the fixed manufacturing overhead. Same Budgeted Lump Sum Regardless of Output Level 2. Actual Costs Incurred Flexible Budget Allocated Overhead Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis. Prepare journal entries using the 4-variance analysis. Describe how individual fixed manufacturing overhead items are controlled from day to day. Discuss possible causes of the fixed manufacturing overhead variances. Fixed OH 4. Now complete the 4-variance analysis using the amounts you calculated above. (If no variance exists, leave the dollar value blank. Label the variance as favorable (F), unfavorable (U) or never a variance (N).) Print Done Spending Variance Efficiency Variance Production-Volume Variance 4-Variance Analysis Variable OH Fixed OH Requirement 2. Prepare journal entries using the 4-variance analysis. Record the actual variable manufacturing overhead incurred. (Record debits first, then credits. Exclude explanations from any journal entries.) Journal Entry Date Accounts Debit Credit Record the variable manufacturing overhead allocated. Journal Entry Date Accounts Debit Credit Record the variable manufacturing overhead variances for the period. Journal Entry Date Accounts Debit Credit Record the actual fixed overhead costs incurred. Journal Entry Date Accounts Debit Credit Record the fixed overhead costs allocated. Journal Entry Date Accounts Debit Credit Record the fixed overhead variances for the period. Journal Entry Accounts Date Debit Credit Requirement 3. Describe how individual fixed manufacturing overhead items are controlled from day to day. Individual fixed manufacturing overhead items are affected very much by day-to-day control. They are controlled Requirement 4. Discuss possible causes of the fixed manufacturing overhead variances. The fixed overhead V variance is caused by the actual realization of fixed costs differing from the budgeted amounts. In this example, the variance is , so actual FOH is the budgeted amount of FOH. The fixed overhead from expected levels, or if there are problems with production. Over capacity is usually driven by variance is caused by production being over or under expected capacity. You may be under capacity when demand y. The fact that there is a variance indicates that
