Answer:
a. -$783 Unfavorable
b. 550 Favorable
Explanation:
a. The computation of Variable Overhead Rate Variance is shown below:-
Variable Overhead Rate Variance = Actual hours × (Standard Variable Overhead rate per hour - Actual Variable Overhead rate per hour)
= 8,700 × ($4.10 - ($36,540 ÷ 8,700)
= 8,700 × ($4.10 - $4.19)
= 8,700 × -$0.09
= -$783 Unfavorable
b. The computation of Variable Overhead Efficiency Variance is shown below:-
Variable Overhead Efficiency Variance = Standard Variable Overhead Rate per Hour × (Standard Hours for Actual Production - Actual Hours)
= 5.5 × ((5.5 × 1,600) - 8,700)
= 5.5 × (8,800 - 8,700)
= 5.5 × 100
= 550 Favorable
Answer:
3,600 workers and 135 machines is more technically efficient.
Explanation:
a. For 3,600 workers and 135 machines
Worker technical efficiency = 3,600/3,000 = $120%
Machine technical efficiency = 135 / 3,000 = 4.50%
Average technical efficiency = (120% + 4.5%) / 2 = 62.25%
b. For 270 machines and 3,300 workers.
Worker technical efficiency = 270/3,000 = $9%
Machine technical efficiency = 3,300 / 3,000 = 110%
Average technical efficiency = (9% + 110%) / 2 = 59.50%
Conclusion
Since the average technical efficiency of 62.25% is higher than 59.50%, 3,600 workers and 135 machines is more technically efficient.
Answer:
Debit : Bad Debts account : $2000 (appearing in the income statement)
Credit : Provision for doubtful debts account : $2000 (appearing in the balance sheet)
Explanation:
This is an example of provision for doubtful debts. Provision for doubtful debts is an estimated amount of bad debts from accounts receivables that has been issues but not yet collected. This is done under the accrual accounting concept where an expense is identified as soon as invoices have been issued rather than waiting long periods to find out which invoice is irrecoverable. It is typically an estimate based on past experience.
In this question, the sales value has not been provided, hence an assumption is made:
Sales : $200,000
If provision for doubtful debts is 1% of sales and all sales is on credit, then the provision for doubtful debts amount is = 1% x $200,000 = $2000
Provision for doubtful debts is an accounts receivable contra account and thus has a credit balance and is recorded in the balance sheet, listed directly under accounts receivables.
The entry is recorded as:
Debit : Bad Debts account : $2000 (appearing in the income statement)
Credit : Provision for doubtful debts account : $2000 (appearing in the balance sheet)
