Q6TI - Horngren'S Financial And Managerial Accounting

Question

Gunter Company reported the following manufacturing overhead variances.

Variable overhead cost variance	$320 F
Variable overhead efficiency variance	458 U
Fixed overhead cost variance	667 U
Fixed overhead volume variance	625 F

24. Record the journal entry to adjust Manufacturing Overhead. 

25. Was Manufacturing Overhead overallocated or underallocated?

Step-by-Step Solution

Answer

Answer

1. Manufacturing overhead adjusted by credit of $180.

2. Manufacturing overhead are under-allocated.

Step 1: Definition of Variance Analysis

The analysis used to determine the difference between the actual activity level and the standard activity level is known as variance analysis. This is carried out to control the business process.

Step 2: Journal entry

Date	Accounts and Explanation	Debit $	Credit $
	Variable overhead efficiency variance	$458
	Fixed overhead cost variance	667
	Variable overhead cost variance		$320
	Fixed overhead volume variance		$625
	Manufacturing overhead		$180
	(To record the adjustment of manufacturing overhead)

Step 3: Manufacturing overhead under-allocated or over-allocated

The manufacturing overheads of the business entity are adjusted by crediting which means that it is under-allocated.