The Following Information Comes from the Records of Magno Co

question 208

Essay

The following information comes from the records of Magno Co. for the current period.
a. Compute the overhead controllable and volume variances. In each case, state whether the variance is favorable or unfavorable.
b. Prepare the journal entries to charge overhead costs to work in process and the overhead variances to their proper accounts.
$\begin{array}{ll}\text { Actual costs and quantities: }\\ \text { Direct materials used} & 38,000 \text { feet @ } \$ 6.20 \text { per foot } \\ \text { Direct labor hours used } & 50,660 \text { hours } \\ \text { Direct labor rate per hour } & \$ 16 \\\text { Factory overhead } & \$ 211,600 \\25,000 \text { units were produced during the period. }\end{array}$

$\text { Standard costs and quantities per unit: }$
$\begin{array}{llr} \text { Direct materials } &\text {1.5 ft. @ \$6.10 per ft.}\\ \text {Direct labor } &\text {2 hours@\$17per hour}\\\end{array}$

Factory overhead (based on budgeted production of 24,500 units)
Variable overhead $\$ 2.25$ /direct labor hour
Fixed overhead $\$ 1.95 /$ direct labor hour

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Definitions:

Standard Activity

A benchmark or base level of activity used for planning, measuring, and controlling performance.

Quantity Standard

A preset benchmark that specifies the expected amount or number of units to be used or produced under normal conditions.

Variable Manufacturing Overhead

The portion of manufacturing overhead costs that varies with the level of production output, such as utility costs or indirect materials.

Labor Rate Variance

The difference between the actual hourly labor rate and the standard rate, multiplied by the number of hours worked during the period.