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prepare journal entries to record actual overhead costs application of overhead to p 642453

(OH variances; journal entries) N Joy makes wooden picnic tables, swings, and benches. Standard hours for each product are as follows:

Picnic table

10 standard direct labor hours


3 standard direct labor hours


7 standard direct labor hours

The standard variable overhead rate is $4 per direct labor hour. The standard fixed overhead rate, computed using an expected annual capacity of 36,000 direct labor hours, is $2 per direct labor hour. The company estimates stable fixed overhead costs and direct labor hours each month of the annual period. March production was 100 picnic tables, 400 swings, and 60 benches; production required 2,780 actual direct labor hours. Actual variable and fixed overhead for March were $12,800 and $5,900, respectively.

a. Prepare a variance analysis using the four variance approach. (Hint: Convert the production of each type of product into standard hours for all work accomplished for the month.)

b. Prepare journal entries to record actual overhead costs, application of overhead to production, and closing of the overhead variance accounts (assuming those variances are immaterial).

c. Evaluate the effectiveness of the managers in controlling costs.

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