The Fielder manufacturing company uses job order costing system. The company uses machine hours to apply overhead cost to jobs. At the beginning of 2020, the company estimated that 7,850 machine hours would be worked and $1,256,000 overhead cost would be incurred during 2020. The following activities took place in the work in process inventory during February: WIP Inventory A/C February 1 Bal. b/f 51,250 Direct Materials Used 256,400 Other transactions incurred: Indirect material issued to production was $38,000 Total manufacturing labour incurred in February was $345,000, 80% of this amount represented direct labour. Other manufacturing overhead costs incurred for February amounted to $340,750. Two jobs were completed with total costs of $324,000 & $240,000 respectively. They were sold on account at a margin of 40% on sales. Required: iii) Calculate the manufacturing overhead variance for Fielder and state the journal entries necessary to dispose of the variance.

Uncategorized / By
  

The Fielder manufacturing company uses job order costing system. The company uses machine hours to apply overhead cost to jobs. At the beginning of 2020, the company estimated that 7,850 machine hours would be worked and $1,256,000 overhead cost would be incurred during 2020. The following activities took place in the work in process inventory during February:

WIP Inventory A/C

February 1 Bal. b/f 51,250

Direct Materials Used 256,400

Other transactions incurred:

  • Indirect material issued to production was $38,000
  • Total manufacturing labour incurred in February was $345,000, 80% of this amount represented direct labour.
  • Other manufacturing overhead costs incurred for February amounted to $340,750.
  • Two jobs were completed with total costs of $324,000 & $240,000 respectively. They were sold on account at a margin of 40% on sales.

Required:

iii) Calculate the manufacturing overhead variance for Fielder and state the journal entries necessary to dispose of the variance.