Exercise 4: Point System in Overhead Rate Computation

Estimate Points Total Estimate

d Per Unit Points d FOH
Product Quantity Point Per Unit
Product

A 6,000 5 30,000 P 7.50 225,000 P 37.50

B 8,000 3 24,000 7.50 180,000 22.50

54,000 P405,000

*₱ 405,000/54,000 points = ₱ 7.50 per points

Exercise 5: Computation for Overhead Variance and Journal Entries

a. Compute for the factory overhead variance.

Factory overhead variance:

Actual factory overhead ₱ 470,500
Less:
Actual factory overhead
58,000 hours x ₱ 8 464,000
Factory overhead
Variance – underapplied ₱ 6,500

b. Make the journal entries that relate to factory overhead in 19F.

Work in Process 464,000

Applied Factory Overhead 464,000
To charge overhead to production

Actual Factory Overhead 470,500

Cash and other credits 470,500
To record Factory Overhead incurred

Applied Factory Overhead 464,000

Factory Overhead Variance 6,500
Actual Factory Overhead 470,500
To close Factory Overhead applied &
control
 Cost of Goods Sold 6,500
Factory Overhead Variance 6,500
To close the Variance to Cost of Goods
Sold

Exercise 6: Fixed Budget Analysis

Analyze the factory overhead variance of Golden Manufacturers, Inc. based on

the data given in Exercise 5.

Fixed budget analysis

Spending variance:
Actual factory overhead ₱ 470,500
Less:
Budgeted factory overhead
60,000 hours x ₱ 8 480,000
Spending variance
- favorable ₱ (9,500)

Idle capacity variance

Budgeted factory overhead ₱ 480,000
Less:
Applies factory overhead
58,000 hours x ₱ 8 464,000
Idle capacity variance
- unfavorable ₱ 16,000