Use the given to answer the questions below:
Morningstar Corporation produces decorator wall coverings. Budgeted production is 480,000 square feet per month, and the standard direct labor requirement to make this amount is 12,000 hours. All overhead is allocated based on direct labor hours. Morningstar's management is interested in what caused the recent month's favorable overhead variance of $1,750. The following information is available:
Budgeted Amounts Actual Results
Production in units 480,000 600,000
Total labor hours 12,000 15,000
Total variable overhead $18,000 $22,400
Total fixed overhead $9,000 $9,600
Total overhead $27,000 $32,000
Question 1: Refer to the information above. The journal entry to apply overhead to Work In Process Inventory for the month included:
a. A debit to Work In Process Inventory of $32,000.
b. A debit to Work In Process Inventory of $27,000.
c. A debit to Work In Process Inventory of $33,750.
d. A credit to Work In Process Inventory of $1,750.
Question 2: Refer to the information above. The overhead volume variance for the month in question was:
a. $500 unfavorable.
b. $2,250 favorable.
c. $6,750 favorable.
d. $2,250 unfavorable.
Question 3: An expenditure made by a company to purchase a fleet of delivery trucks is an example of a capital investment.
a. True
b. False