K’s Kustom Furniture has applied overhead of $1,300,000.

The $1,300,000 is allocated to the following accounts:

Work-in-progress $200,000
Finished goods $150,000
Cost of goods sold $950,000

The balances in the accounts are as follows:

Work-in-progress $675,000
Finished goods $525,000
Cost of goods sold $3,500,000
Actual overhead is $1,450,000

Solution

Work-in-progress $200,000 / $1,300,000 = 15.38%

Finished goods $150,000 / $1,300,000 = 11.54%
Cost of goods sold $950,000 / $1,300,000 = 73.08%

$1,300,000 – $1,450,000 = $150,000 underapplied.

Multiply the $150,000 by each of the percentages.

Work-in-progress $200,000 / $1,300,000 = 15.38% X $150,000 = $23,070 underapplied in work-in-progress

Finished goods $150,000 / $1,300,000 = 11.54% X $150,000 = $17,310 underapplied in finished goods
Cost of goods sold $950,000 / $1,300,000 = 73.08% X $150,000 = $109,620 underapplied in cost of goods sold
The following data are given on the production of Yoongi Manufacturing Co. for 19C:

Budgeted production volume…………………….. 20,000 units

Budgeted labor hours……………………………... 100,000 hours
Estimated machine hours…………………………. 8,000 hours
Budgeted materials cost………………………….. P50, 000
Budgeted labor cost……………………………….. P25, 000
Budgeted factory overhead………………………...P50, 000
Seokjin Manufacturers, Inc. applies factory overhead at P8 per direct labor hour. Actual
factory overhead and actual labor hours for Department A were P470, 500 and 58,000
hours, respectively. Normal capacity is 60,000 hours.

Compute for the factory overhead variance.

Make journal entries that relate to factory overhead of Department A
Seokjin Manufacturers, Inc. applies factory overhead at P8 per direct labor hour. Actual
factory overhead and actual labor hours for Department A were P470, 500 and 58,000
hours, respectively. Normal capacity is 60,000 hours.

Compute for the spending variance and idle capacity variance

Seokjin Manufacturers, Inc. applies factory overhead at P8 per direct labor hour. Actual
factory overhead and actual labor hours for Department A were P470, 500 and 58,000
hours, respectively. Normal capacity is 60,000 hours. Assume that fixed factory overhead
of Seokjin Manufacturers amounts to 120,000.

Required:

 Variable overhead rate

 Budget allowance based on actual capacity
 Spending Variance
 Idle Capacity Variance