Assume that at the end of the year, management of Patel and Sons decides that the overhead cost variances should be allocated to WIP Inventory, Finished Goods Inventory, and Cost of Goods Sold (CGS) using the following percentages: 10%, 20%, and 70%, respectively. Provide the proper journal entry to close out the manufacturing overhead variances for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Assume that at the end of the year, management of Patel and Sons decides that the overhead cost variances should be allocated to WIP Inventory, Finished Goods Inventory, and Cost of Goods Sold (CGS) using the following percentages: 10%, 20%, and 70%, respectively. Provide the proper journal entry to close out the manufacturing overhead variances for the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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.
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[The following information applies to the questions displayed below.]
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for
the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed
factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory
overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual
output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for the year
amounted to $245,000, while the actual variable overhead cost per unit was $3.90.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F38e104a1-706b-44fe-b655-51281c8f9865%2F5fd471a5-4e5c-4761-9293-5685c8297e00%2F74da9z_processed.png&w=3840&q=75)
Transcribed Image Text:Required information
[The following information applies to the questions displayed below.]
Patel and Sons Inc. uses a standard cost system to apply factory overhead costs to units produced. Practical capacity for
the plant is defined as 50,000 machine hours per year, which represents 25,000 units of output. Annual budgeted fixed
factory overhead costs are $250,000 and the budgeted variable factory overhead cost rate is $4 per unit. Factory
overhead costs are applied on the basis of standard machine hours allowed for units produced. Budgeted and actual
output for the year was 20,000 units, which took 41,000 machine hours. Actual fixed factory overhead costs for the year
amounted to $245,000, while the actual variable overhead cost per unit was $3.90.
Transcribed Image Text:Assume that at the end of the year, management of Patel and Sons decides that the overhead cost variances should be allocated to
WIP Inventory, Finished Goods Inventory, and Cost of Goods Sold (CGS) using the following percentages: 10%, 20%, and 70%,
respectively. Provide the proper journal entry to close out the manufacturing overhead variances for the year. (If no entry is required
for a transaction/event, select "No journal entry required" in the first account field.)
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