Channing corporation makes two products (A1 and B2) that require direct materials, direct labor, and overhead. The following data refer to operations expected for next month. A1 B2 Total Revenue $280,000 $840,000 $1,120,000 Direct material 120,000 240,000 360,000 Direct labor 76,000 180,000 256,500 Overhead: Direct material related 118,800 Direct labor related 112,860 Required: Channing uses a two-stage cost allocation system, it uses direct-material costs to allocate direct-materials related overhead and direct-labor costs to allocate direct-labor related overhead costs. Compute the direct-material related overhead rate for next month. Compute the direct-labor related overhead rate for next month. What is the total overhead allocated to product A1 next month? What is the total overhead allocated to product B2 next month? Predetermined rate _______________ % of direct-materials cost Predetermined rate _______________ % of direct-labor cost total overhead (A1) _______________ Total overhead (B2) ________________
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.
Channing corporation makes two products (A1 and B2) that require direct materials, direct labor, and
A1 B2 Total
Revenue $280,000 $840,000 $1,120,000
Direct material 120,000 240,000 360,000
Direct labor 76,000 180,000 256,500
Overhead:
Direct material related 118,800
Direct labor related 112,860
Required:
Channing uses a two-stage cost allocation system, it uses direct-material costs to allocate direct-materials related overhead and direct-labor costs to allocate direct-labor related overhead costs.
- Compute the direct-material related overhead rate for next month.
- Compute the direct-labor related overhead rate for next month.
- What is the total overhead allocated to product A1 next month?
- What is the total overhead allocated to product B2 next month?
- Predetermined rate _______________ % of direct-materials cost
- Predetermined rate _______________ % of direct-labor cost
- total overhead (A1) _______________
- Total overhead (B2) ________________
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