8-35 Comprehensive variance analysis. Cooking Whiz manufactures premium food processors. The fol- lowing are some manufacturing overhead data for Cooking Whiz for the year ended December 31, 2017: Flexible Budget $ 80,640 Manufacturing Overhead Actual Results Allocated Amount S 80,640 $ 71,808 Variable Fixed 360,672 351,360 368,640 Budgeted number of output units: 915 Planned allocation rate: 2 machine-hours per unit Actual number of machine-hours used: 1,632 Static-budget variable manufacturing overhead costs: $76,860 Compute the following quantities (you should be able to do so in the prescribed order): 1. Budgeted number of machine-hours planned 2. Budgeted fixed manufacturing overhead costs per machine-hour 3. Budgeted variable manufacturing overhead costs per machine-hour 4. Budgeted number of machine-hours allowed for actual output produced 5. Actual number of output units 6. Actual number of machine-hours used per output unit
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.
1. Prepare journal entries for variable and fixed manufacturing
2. Overhead variances are written off to the Cost of Goods Sold (COGS) account at the end of the fiscal year. Show how COGS is adjusted through journal entries.
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