Kemp Manufacturing set 70,000 direct labor hours as the 2010 capacity measure for computing its predetermined variable overhead rate. At that level, budgeted variable overhead costs are $315,000. Kemp will apply budgeted fixed overhead of $140,400 on the basis of 3,900 budgeted machine hours for the year. Both machine hours and fixed overhead costs are expected to be incurred evenly each month.
During March 2010, Kemp incurred 5,900 direct labor hours and 300 machine hours. Actual variable and fixed overhead were $26,325 and $11,400, respectively. The standard times allowed for March production were 5,980 direct labor hours and 290 machine hours.
a. Using the four-variance approach, determine the overhead variances for March 2010.
b. Prepare all journal entries related to overhead for Kemp Manufacturing for March 2010.
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