Question

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The Platter Valley factory of Bybee Industries manufactures field boots. The cost of each boot includes direct materials, direct labor, and manufacturing overhead. The firm traces all direct costs to products, and it assigns overhead based on direct labor hours.

   The company budgeted $11,925 variable overhead and 2,250 direct labor hours to manufacture 4,500 pairs of boots in March.

   The factory used 3,400 direct labor hours in March to manufacture 4,100 pairs of boots and spent $16,500 on variable overhead during the month.

   For March the Platter Valley factory of Bybee Industries budgeted $96,750 of fixed overhead. Its practical capacity is 2,250 direct labor hours per month (to manufacture 4,500 pairs of boots).

   The actual fixed overhead incurred for the month was $99,450.

Required:

1.

Compute the flexible-budget variance, the spending variance, and the efficiency variance for variable overhead for March.

2.	Provide appropriate journal entries to record the variable overhead spending and efficiency variances. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

	Actual Variable overhead rate per hour	4.85	(16500/3400)
	Standard Variable overhead rate per hour	5.3	(11925/2250)
	Standard Hours	2050	Hours	(2250/4500)*4100
	Flexible-budget variance	5625	U
	Variable overhead spending variance	1530	F	(5.3-4.85)*3400
	Variable overhead efficiency variance	7155	U	(2050-3400)*5.3
Date	Account and Explanation	Debit	Credit
	Factory Overhead (or, Variable Factory Overhead)	1530
	Variable overhead spending variance		1530
	(To record variance)
	Variable overhead efficiency variance	7155
	Factory Overhead (or, Variable Factory Overhead)		7155
	(To record variance)