Overhead Variances, Four-Variance Analysis, Journal Entries Laughlin, Inc., uses

Question

Overhead Variances, Four-Variance Analysis, Journal Entries Laughlin, Inc., uses a standard costing system. The predetermined overhead rates are calculated using practical capacity. Practical capacity for a year is defined as 1,000,000 units requiring 200,000 standard direct labor hours. Budgeted overhead for the year is $750,000, of which $300,000 is fixed overhead. During the year, 900,000 units were produced using 190,000 direct labor hours. Actual annual overhead costs totaled $800,000, of which $294,700 is fixed overhead

Explanation / Answer

In entry (c), you have debited fixed overhead volume variance . Therefore to close the variance account you need to credit the account . By this the debit to cost fo goods sold also will change. The entry will be

Account Title Debit Credit Cost of goods sold 130300 Fixed overhead volume variance 30000 Variable overhead spending variance 77800 Variable overhead efficiency variance 22500

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