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The practical capacity for a year is defined as 20,000 units requiring 25,000 direct labor hours. The total budgeted overhead cost is $170,000, of
The practical capacity for a year is defined as 20,000 units requiring 25,000 direct labor hours. The total budgeted overhead cost is $170,000, of which the budgeted variable overhead cost is $95,000. The labor efficiency variance is $2,625 favorable and the standard labor cost is $3 per direct labor hour. The actual units produced are 18,500 units. The actual fixed overhead cost was $74,000. The actual variable overhead cost was $100,000. Questions: (1) Compute the variable overhead spending and efficiency variances. (2) Compute the fixed overhead spending and volume variances. (3) Prepare all the relevant journal entries (including the closing entry). (1) VOH Spending V = $15,450 U; VOH Efficiency V = ($3,325) F (2) FOH Spending V = ($1,000) F; FOH Volume V = $5,625 U VOH: Journal entries FOH: (i) Dr. WIP 87,875 Cr. VOH control 87,875 (i) Dr. WIP Cr. FOH control 69,375 69,375 (ii) Dr. VOH control 100,000 Cr. Various accounts 100,000 (ii) Dr. FOH control 74,000 Cr. Various accounts 74,000 (iii) Dr. VOH Spending 15,450 Cr. VOH Efficiency 3,325 Cr. VOH control 12,125 (iii) Dr. FOH Volume 5,625 Cr. FOH control Cr. FOH Spending 4,625 1,000 (iv) Dr. VOH efficiency 3,325 Dr. COGS 12,125 (iv) Dr. FOH spending 1,000 Cr. VOH spending 15,450 Dr. COGS 4,625 Cr. FOH volume 5,625
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