At the beginning of the year 2018, SASB estimates the following costs: Manufacturing overhead costs$ 498,750 Direct labor cost $ 600,000 The following are information related to the production in 2018: Direct labor $ 640,000 Depreciation $ 120,000 Property tax $ 6,000 Supervisor salary $ 100,000 Utilities $ 29,500 Insurance $ 15,000 Rental of space $ 150,000 Indirect labor $ 41,000 Indirect material : Inventory at January 2017 $ 24,000 Purchase during the year $ 47,000 Inventory at December 2017 $ 31,500 T he price per unit for direct material is estimated at $ 5 per unit and direct labor rate per unit is $ 16 per hour. The accountant informed that this amount is similar for both budgeted and actual costs. REQUIRED: (a) Calculate the pre-determined overhead rate for SASB using direct labor hour as a basis. (b) Calculate the under-applied or over-applied overhead. (c) Prepare a journal entry to close the overhead variance to the cost of goods sold
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.
Syarikat Aman Sdn Bhd (SASB) manufactures leather products for the local market.
At the beginning of the year 2018, SASB estimates the following
Manufacturing
Direct labor cost $ 600,000
The following are information related to the production in 2018:
Direct labor $ 640,000
Property tax $ 6,000
Supervisor salary $ 100,000
Utilities $ 29,500
Insurance $ 15,000
Rental of space $ 150,000
Indirect labor $ 41,000
Indirect material :
Inventory at January 2017 $ 24,000
Purchase during the year $ 47,000
Inventory at December 2017 $ 31,500 T
he price per unit for direct material is estimated at $ 5 per unit and direct labor rate per unit is $ 16 per hour. The accountant informed that this amount is similar for both budgeted and actual costs.
REQUIRED:
(a) Calculate the pre-determined overhead rate for SASB using direct labor hour as a basis.
(b) Calculate the under-applied or over-applied overhead.
(c) Prepare a
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