Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: raw materials = 14,850 (beginning balance) 22,850 (ending balance) work in process 27,850 (beginning balance) 9,850 (ending balance) finished goods 62,850 (beginning balance) 77,850 ( ending balance) The company applies overhead to jobs using a predetermined overhead rate based on machine - hours. At the beginning of the year, the company estimated that it would work 33, 850 machine - hours and incur $294, 495 in manufacturing overhead cost. The following transactions were recorded for the year: Raw materials were purchased, $ 315,850. Raw materials were requisitioned for use in production, $307,850 ($280, 150 direct and $27,700 indirect). The following employee costs were incurred: direct labor, $377, 850; indirect labor, $96, 850; and administrative salaries, $172,850. Selling costs, $147,850. Factory utility costs, $10,850. Depreciation for the year was $178,000 of which $ 171,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34, 170 machine-hours. Sales for the year totaled $1,315,000. Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underapplied or overapplied? By how much? c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.
Baab Corporation is a manufacturing firm that uses job-order costing. The company's inventory balances were as follows at the beginning and end of the year: raw materials = 14,850 (beginning balance) 22,850 (ending balance) work in process 27,850 (beginning balance) 9,850 (ending balance) finished goods 62,850 (beginning balance) 77,850 ( ending balance) The company applies overhead to jobs using a predetermined overhead rate based on machine - hours. At the beginning of the year, the company estimated that it would work 33, 850 machine - hours and incur $294, 495 in manufacturing overhead cost. The following transactions were recorded for the year: Raw materials were purchased, $ 315,850. Raw materials were requisitioned for use in production, $307,850 ($280, 150 direct and $27,700 indirect). The following employee costs were incurred: direct labor, $377, 850; indirect labor, $96, 850; and administrative salaries, $172,850. Selling costs, $147,850. Factory utility costs, $10,850. Depreciation for the year was $178,000 of which $ 171,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities. Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34, 170 machine-hours. Sales for the year totaled $1,315,000. Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead underapplied or overapplied? By how much? c. Prepare an income statement for the year. The company closes any underapplied or overapplied overhead to Cost of Goods Sold.
Chapter1: Financial Statements And Business Decisions
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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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Transcribed Image Text:Baab Corporation is a manufacturing firm that uses job - order costing. The company's inventory balances were as
follows at the beginning and end of the year: raw materials = 14,850 (beginning balance) 22,850 (ending balance) work
in process 27,850 (beginning balance) 9,850 (ending balance) finished goods 62,850 (beginning balance) 77,850 (
ending balance) The company applies overhead to jobs using a predetermined overhead rate based on machine - hours.
At the beginning of the year, the company estimated that it would work 33, 850 machine - hours and incur $294,495 in
manufacturing overhead cost. The following transactions were recorded for the year: Raw materials were purchased, $
315,850. Raw materials were requisitioned for use in production, $307,850 ($280, 150 direct and $27,700 indirect).
The following employee costs were incurred: direct labor, $377, 850; indirect labor, $96, 850; and administrative salaries,
$172,850. Selling costs, $147,850. Factory utility costs, $10,850. Depreciation for the year was $178,000 of which $
171,000 is related to factory operations and $7,000 is related to selling, general, and administrative activities.
Manufacturing overhead was applied to jobs. The actual level of activity for the year was 34, 170 machine-hours. Sales
for the year totaled $1,315,000. Required: a. Prepare a schedule of cost of goods manufactured. b. Was the overhead
underapplied or overapplied? By how much? c. Prepare an income statement for the year. The company closes any
underapplied or overapplied overhead to Cost of Goods Sold.
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