Problem II

Updike Company applies both variable and fixed overhead based on machine hours. The relevant range of production for this activity is 0 to 10,000 units per month. For October, 2015, the following monthly information is obtained:

Budgeted and Standard Amounts:

Machine hours per unit of output........................... 3

Variable overhead per machine hour.................... $?

Fixed overhead per machine hour........................ $2.10

Total overhead per machine hour........................ $2.90 (both variable and fixed)

Total budgeted fixed overhead............................ $?

Total budgeted variable overhead........................ $4,800

Budgeted machine hours....................................... ?

Budgeted output in units....................................... 2,000

Actual Amounts:

Units produced...................................... 2,200

Machine hours....................................... 6,800

Variable overhead................................. $4,900

Fixed overhead...................................... $12,000

Required:

1. Compute the fixed overhead and variable overhead variances. Compute a total of four variances.

2. If production were budgeted at 1,800 units, what would be the amount of the total budgeted fixed and total budgeted variable overhead costs in the flexible budget for October?

Fixed -

Variable -

3. Prepare one journal entry to record the actual fixed overhead cost and the amount applied to production. Include all of the fixed overhead variances in one journal entry (standard costing system).