Decoration Inc. evaluates manufacturing overhead in its flowerpot factory using four variances. Manufacturing overhead is applied on the basis of direct labor hours. The company's fiscal period runs from January to December, and the following information for the year is provided:
Budgeted data:
- Output units: 140,000 flowerpots or 28,000 hours
- Direct manufacturing labor hour per unit of output: 0.2 hours per flowerpot
Actual data:
- Output units: 150,000 flowerpots
- Direct manufacturing hours used: 40,000 hours
Variable manufacturing overhead:
- Budgeted rate: $1.50 per direct labor hour
- Actual cost incurred: $55,000
Fixed manufacturing overhead:
- Budgeted cost: $112,000
- Actual cost incurred: $120,000
Required: Calculate the two variable and two fixed manufacturing overhead variances for the year. Give journal entries for both variable and fixed overhead variances.