Variable Factory Overhead Variances; Journal Entries The Platter Valley factory of BybeeIndustries manufactures field boots. The cost of each boot includes direct materials, direct labor,and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assignsoverhead cost to products based on direct labor hours.The company budgeted $15,000 variable factory overhead cost and 2,500 direct labor hours tomanufacture 5,000 pairs of boots in March.The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots and spent$15,600 on variable overhead during the month.[LO 15-1, 15-2][LO 15-1, 15-2][LO 15-2, 15-3]Final PDF to printer656 Part Three Operational-Level Controlblo17029_ch15_621-670.indd 656 02/20/18 09:49 AMRequired1. Compute the factory overhead flexible-budget variance, the factory overhead spending variance, andthe efficiency variance for variable factory overhead for March. Round each variance to the nearestwhole number, and state whether each variance is favorable (F) or unfavorable (U).2. Provide the appropriate journal entry to record the variable overhead spending variance and a secondentry to record the variable overhead efficiency variance for March. Assume that the company uses asingle account, Factory Overhead, to record overhead costs.3. Comment on the factory’s operation in March with regard to variable factory overhead cost
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Variable Factory
Industries manufactures field boots. The cost of each boot includes direct materials, direct labor,
and manufacturing (factory) overhead. The firm traces all direct costs to products, and it assigns
overhead cost to products based on direct labor hours.
The company budgeted $15,000 variable
manufacture 5,000 pairs of boots in March.
The factory used 2,700 direct labor hours in March to manufacture 4,800 pairs of boots and spent
$15,600 on variable overhead during the month.
[LO 15-1, 15-2]
[LO 15-1, 15-2]
[LO 15-2, 15-3]
Final PDF to printer
656 Part Three Operational-Level Control
blo17029_ch15_621-670.indd 656 02/20/18 09:49 AM
Required
1. Compute the factory overhead flexible-
the efficiency variance for variable factory overhead for March. Round each variance to the nearest
whole number, and state whether each variance is favorable (F) or unfavorable (U).
2. Provide the appropriate
entry to record the variable overhead efficiency variance for March. Assume that the company uses a
single account, Factory Overhead, to record overhead costs.
3. Comment on the factory’s operation in March with regard to variable factory overhead cost
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
