Castinata Co. uses a standard job cost system and a denominator volume of 25,000 direct labour hours for allocating overhead. The actual output was 12,000 units, which cost $185,700 for direct labour (23,000 hours), $28,000 for variable overhead, and $150,000 for fixed overhead.
The standard variable overhead per unit is $2 (2 hours @ $1 per hour), and the standard fixed overhead per unit is $10 (2 hours @ $5 per hour).
All variances are immaterial and are closed to Cost of Sales at the end of the period.
The entry to close the fixed overhead variances includes a:

Question

Quizplus · Accepted Answer

The fixed overhead variance is closed to Cost of Sales. Since the actual fixed overhead ($150,000) is higher than the applied fixed overhead based on standard rates (12,000 units * $10/unit = $120,000), the difference of $30,000 ($150,000 - $120,000) is a debit to Cost of Sales to adjust for the higher actual expense.