The Taravez 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 3,900 output units per year, included 5 machine-hours of variable manufacturing overhead at $7 per hour and 5 machine-hours of fixed manufacturing overhead at $16 per hour. Actual output produced was 4,300 units. Variable manufacturing overhead incurred was $260,000. Fixed manufacturing overhead incurred was $265,000. Actual machine-hours were 30,000.

Requirements

1.	Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances, using the 4-variance analysis.
2.	Prepare journal entries using the 4-variance analysis.
3.	Describe how individual fixed manufacturing overhead items are controlled from day to day.
4.	Discuss possible causes of the fixed manufacturing overhead variances.

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
	Actual Costs	x	Flexible	Allocated
	Incurred	Budgeted Rate	Budget	Overhead
Variable OH

Now complete the table below for the fixed manufacturing overhead.

		Same Budgeted
		Lump Sum
	Actual Costs	Regardless of	Flexible	Allocated
	Incurred	Output Level	Budget	Overhead
Fixed OH

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).)

4-Variance	Spending		Efficiency		Production-Volume
Analysis	Variance		Variance		Variance
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.)