A company has made the following journal entry in a standard cost system. GENERA

Question

A company has made the following journal entry in a standard cost system. GENERAL JOURNAL Description Debit Credit Variable MOH Applied 150,000 Variable MOH Efficiency Variance 25,000 Variable MOH Spending Variance 5,000 Variable MOH Control 170,000 Which of the following can be inferred from this entry? Select one: Oa. The company spent more on variable manufacturing overhead than the budget allowed. b. The company used less of the cost driver than would have been expected based upon the standards ( c. The company applied too m uch variable manufacturing overhead to production. Od. The work in process, finished goods, and cost of goods sold account balances are understated.

Explanation / Answer

Variable MOH control account records actual overhead expenses incurred. where as variable MOH applied account applies overhead to inventory/cost of goods sold at budget allowed rates.

A close look at both shows that Variable MOH control account balance is more than the variable MOH applied account which means variable expenses related to OH incurred are more than the budget allowed amount.

With the above explanation option a. is correct

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