One division of Heartwood Cabinets anticipates the following costs for the next year:
Cost
Budget
Facilities rent
\$ 72,000
Utilities (fixed)
\$ 28,000
Taxes
\$ 17,000
Wages for production workers
\$ 555,000
Management salaries and benefits
\$ 320,000
Wages for set-up and maintenance workers
\$ 256,000
Direct materials for cabinets
\$ 350,000
Supplies
\$ 38,000
Indirect materials
\$ 120,000
Equipment rental (fixed)
\$ 32,000
Insurance
\$ 25,000
Repairs and maintenance
\$ 36,000
Depreciation
\$ 95,000
The company uses machine hours as the sole cost driver of variable overhead. Based on prior years, Heartwood estimates it will take
0.30 of machine hours per cabinet produced. Budgeted output is 75,000 cabinets. Actual output is 73,000 cabinets and it really takes
0.40 machine hours to produce one cabinet. Actual variable overhead costs are \$474,500. Actual fixed overhead costs are \$600,000.
Required:
a. Calculate budgeted variable overhead for the year.
b. Calculate the variable overhead spending variance.
c. Calculate the variable overhead efficiency variance.
d. Calculate the fixed overhead spending variance.
e. Calculate the production-volume variance.
f. Prepare journal entries to record the variable overhead variances.
g. Prepare journal entries to record the fixed overhead variances.