Question

Which of the following journal entries is used to record the variances for the accounting period? Assume favorable variable overhead efficiency variance and unfavorable variable overhead spending variance.

a) Debit: Variable Overhead Efficiency Variance; Credit: Variable Overhead Spending Variance
b) Debit: Variable Overhead Spending Variance; Credit: Variable Overhead Efficiency Variance
c) Debit: Fixed Overhead Efficiency Variance; Credit: Fixed Overhead Spending Variance
d) Debit: Fixed Overhead Spending Variance; Credit: Fixed Overhead Efficiency Variance

Answer 1

b) Debit: Variable Overhead Spending Variance; Credit: Variable Overhead Efficiency Variance. The correct journal entries to record the variances for the accounting period are: Debit: Variable Overhead Spending Variance; Credit: Variable Overhead Efficiency Variance.

Step-by-step explanation:

The correct journal entries to record the variances for the accounting period are:

Debit: Variable Overhead Spending Variance

Credit: Variable Overhead Efficiency Variance

This is because a debit entry increases the spending variance account, while a credit entry decreases the efficiency variance account. By recording these variances separately, the company can analyze and identify the factors contributing to the variances in overhead costs.