Dobrowolski 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 products are recorded at their standard cost and any variances are closed directly to Cost of Goods Sold. There is no variable manufacturing overhead. The standard cost card for the company's only product is as follows:?InputsStandard Quantity or HoursStandard Price or RateStandard Cost?Direct materials1.8kilos$7.00per kilo$12.60?Direct labor0.50hours$21.50per hour10.75?Fixed manufacturing overhead0.50hours$7.50per hour3.75?Total standard cost per unit????$27.10The standard fixed manufacturing overhead rate was based on budgeted fixed manufacturing overhead of $75,000 and budgeted activity of 10,000
hours.During the year, the company applied fixed overhead to the 12,900 units in work in process inventory using the predetermined overhead rate multiplied by the number of direct labor-hours allowed. Actual fixed overhead costs for the year were $62,600. Of this total, -$3,400 related to items such as insurance, utilities, and indirect labor salaries that were all paid in cash and $66,000 related to depreciation of manufacturing equipment.Required:Completely record the transactions involving fixed overhead, including any variances, in the worksheet that appears below. Because of the width of the worksheet, it is in two parts. In your text, these two parts would be joined side-by-side to make one very wide worksheet. The beginning balances have been provided for each of the accounts, including the Property, Plant, and Equipment (net) account which is abbreviated as PP&E (net).??CashRaw MaterialsWork in ProcessFinished GoodsPP&E (net)=?1/1$1,120,000 $36,540 $0 $62,330 $655,000 =???????=???????=???????=??Materials Price VarianceMaterials Quantity VarianceLabor Rate VarianceLabor Efficiency VarianceFOH Budget VarianceFOH Volume VarianceRetained Earnings?1/1$0$0$0$0$0$0$1,873,870 ???????????????????????????
What will be an ideal response?
Budget variance = Actual fixed overhead ? Budgeted fixed overhead
= $62,600 ? $75,000
= $12,400 F
Volume variance = Budgeted fixed overhead ? Fixed overhead applied to work in process
= $75,000 ? (6,450 hours × $7.50 per hour)
= $75,000 ? ($48,375)
= $26,625 U
| ? | ? | Cash | Raw Materials | Work in Process | Finished Goods | PP&E (net) | = |
| ? | 1/1 | $1,120,000 | $36,540 | $0 | $62,330 | $655,000 | = |
| ? | ? | 3,400 | ? | 48,375 | ? | (66,000) | = |
| ? | ? | Materials Price Variance | Materials Quantity Variance | Labor Rate Variance | Labor Efficiency Variance | FOH Budget Variance | FOH Volume Variance | Retained Earnings |
| ? | 1/1 | ? | ? | ? | ? | ? | ? | $1,873,870 |
| ? | ? | ? | ? | ? | ? | 12,400 | (26,625) | ? |
Cash decreases by the actual amount paid for various fixed overhead costs, which is -$3,400. Work in Process increases by the standard amount of hours allowed for the actual output multiplied by the predetermined overhead rate, which is (12,900 units × 0.50 hours per unit) × $7.50 per hour = 6,450 hours × $7.50 per hour = $48,375. PP&E (net) decreases by the amount of depreciation for the period, which is $66,000. The difference is the Fixed Overhead (FOH) Budget Variance which is $12,400 F and the Fixed Overhead (FOH) Volume Variance which is $26,625 U.
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