Brodie 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), $27,525 for variable overhead, and $136,400 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 Goods Sold at the end of the period.
The entry to close the fixed overhead variances includes a:
A) Credit to work in process for $120,000
B) Debit to fixed overhead control for $125,000
C) Debit to Cost of Goods Sold for $16,400
D) Debit to the fixed overhead production volume variance for $5,000

Question

Quizplus · Accepted Answer

The fixed overhead variance is the difference between the actual fixed overhead ($136,400) and the applied fixed overhead. The applied fixed overhead is based on the standard rate ($10 per unit for 2 hours) and the actual output (12,000 units), which equals $120,000 (12,000 units * $10). The variance is $16,400 ($136,400 actual - $120,000 applied), which is closed to Cost of Goods Sold.

Brodie Co Uses a Standard Job Cost System and a Denominator