Trinity division of Japanese Auto Company uses standard costing system for its production of airbags. Accounting records from the most recent month are given below:
Actual variable manufacturing overhead costs incurred						$537,470
Budgeted variable manufacturing overhead cost rate						$7.00	Per machine hour
Actual fixed manufacturing overhead costs incurred						$146,101
Budgeted fixed manufacuturing overhead costs						$136,000
Budgeted machine hours for the period						68,000
Budgeted machine hours allowed for per unit of output						1.20	Machine hours
Units of output produced during the month						66,500
Actual machine hours used during the month						75,700
Required:
a) Calculate the overhead variances for both fixed and variable overhead costs.
b) Prepare journal entries when the overhead costs are incurred and applied to WIP. Also present journal entries for recognizing OH cost variances.