Dews Corporation manufactures one product.It does not maintain any beginning or ending Work in Process inventories.The company uses a standard cost system in which inventories are recorded at their standard costs and any variances are closed directly to Cost of Goods Sold.There is no variable manufacturing overhead.The fixed manufacturing overhead standards for the company's only product specify 0.90 hours per unit at $20.50 per hour.The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $369,000 and budgeted activity of 18,000 hours.During the year,14,100 units were started and completed.Actual fixed overhead costs for the year were $386,200. Assume that all transactions are recorded on a worksheet as shown in the text.On the left-hand side of the equals sign in the worksheet are columns for Cash,Raw Materials,Work in Process,Finished Goods,and PP&E (net).All of the variance columns are on the right-hand-side of the equals sign along with the column for Retained Earnings.
When the fixed manufacturing overhead cost is recorded,which of the following entries will be made?
A) $108,855 in the FOH Volume Variance column
B) ($108,855) in the FOH Budget Variance column
C) $108,855 in the FOH Budget Variance column
D) ($108,855) in the FOH Volume Variance column

Question

Quizplus · Accepted Answer

Standard hours allowed for the actual output = 14,100 units × 0.90 hours per unit = 12,690 hours
Volume variance = Budgeted fixed overhead - Fixed overhead applied to work in process
= $369,000 - (12,690 hours × $20.50 per hour)
= $369,000 - ($260,145)
= $108,855 U
Favorable variances are entered in the worksheet as positive entries and unfavorable variances as negative entries.

Dews Corporation Manufactures One Product