Reference no: EM13876768
Journal Entries for Factory Overhead Costs and Standard Cost Variances Refer to the information for Johnny Lee, Inc., in Exercise 15-45. Assume that in a given month the standard allowed machine hours for output produced were 5,500. Also, assume that the denominator activity level for setting the predetermined overhead rate is 6,550 machine hours per month.
Actual fixed overhead costs for the month were as follows: engineering support, $15,500 (sala- ries); factory insurance, $5,500; property taxes, $12,000; equipment depreciation, $13,800; super- visory salaries, $14,800; set-up labor, $2,200; materials-handling labor, $2,400. The actual variable overhead cost per machine hour worked was equal to the standard cost except for the following two items: electricity, $8.50 per machine hour; manufacturing supplies, $2.10 per machine hour. The company used 5,600 machine hours in December.
The company uses a single overhead account, Factory Overhead, and performs a two-way analy- sis of the total overhead variance each month.
Required
1. Calculate the (a) flexible-budget variance, and (b) the production-volume variance for the month. (Hint: The total overhead variance for the month is $16,660U.)
2. Provide summary journal entries to record actual overhead costs and standard overhead cost applied to production during the month.
3. Provide the journal entry to record the two overhead variances for the month.
4. Assume that the variances calculated above represent net variances for the year. Give the required jour- nal entry to close these variances to the Cost of Goods Sold (CGS) account.
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