The Wheeler Manufacturing Company uses a standard absorption costing job costing system. Manufacturing overhead is allocated to products on the basis of standard direct labor hours. At the beginning of 2020, Wheeler adopted the following standards for its manufacturing costs:

Direct materials 2 lb. @ $8 per lb.

Direct labor 4 hr @ $22 per hour

Overhead:

Variable $8 per direct labor hour

Fixed $6 per direct labor hour

The denominator level (ie. the planned or expected level of production) for total manufacturing overhead per month in 2020 is 50,000 direct labor hours.

Wheelers expected level of sales is 8,500 units at $210 each. Wheelers static budget for January 2020 was based on this denominator level.

The records for January indicated the following:

1. Direct materials purchased 27,000 lb at $8.40 per pound

2. Direct materials used 26,500 lb

3. Direct labor 51,500 hours @ $21.25 per hour

4. Total overhead $700,000 (60% is variable; 40% is fixed)

5. Actual production 12,000 units

6. Units sold 9,500 units at $200 per unit

REQUIRED:

1. Journalize the above transactions for January.

2. For January, determine all eight production variances.

3. Determine the 3-way overhead variances and the 2-way overhead variances.

4. Prepare three contribution margin format income statements: 1) static budget, 2) flexible budget, and 3) actual.

5. Calculate the sales price variance.

6. Calculate the sales volume variance for operating income.