2. Len, Inc., which uses a job-costing system, began business on January 1, 20XX and applies manufacturing overhead on the basis of direct-labor cost. The following information relates to 20XX: • Budgeted direct labor and manufacturing overhead were anticipated to be P200,000 and P250,000, respectively. • Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material and direct labor: Job No. Direct Materials Direct Labor 1 P145,000 P35,000 2 320,000 65,000 3 55,000 80,000 • Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of cost. Job no. 3 remained in production. • Actual manufacturing overhead by year-end totaled P233,000. Len adjusts all under- and overapplied overhead to cost of goods sold. Required: D. Was manufacturing overhead under- or overapplied during 20XX? By how much? E. Present the necessary journal entry to handle under- or overapplied manufacturing overhead at year-end.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
2. Len, Inc., which uses a
manufacturing
to 20XX:
• Budgeted direct labor and manufacturing overhead were anticipated to be P200,000 and
P250,000, respectively.
• Job nos. 1, 2, and 3 were begun during the year and had the following charges for direct material
and direct labor:
Job No. Direct Materials Direct Labor
1 P145,000 P35,000
2 320,000 65,000
3 55,000 80,000
• Job nos. 1 and 2 were completed and sold on account to customers at a profit of 60% of
cost. Job no. 3 remained in production.
• Actual manufacturing overhead by year-end totaled P233,000. Len adjusts all under- and
overapplied overhead to cost of goods sold.
Required:
D. Was manufacturing overhead under- or overapplied during 20XX? By how much?
E. Present the necessary journal entry to handle under- or overapplied manufacturing
overhead at year-end.
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