Compute the firm’s predetermined factory overhead rate for the year. 2. Prepare journal entries to record the August events. 3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31.
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.
Mooresville Corporation manufactures reproductions of eighteenth-century, classical-style furniture. It uses a
- Purchased 6,000 square feet of oak on account at $26 per square foot.
- Purchased 150 gallons of glue on account at $36 per gallon (indirect material).
- Requisitioned 4,200 square feet of oak and 41 gallons of glue for production.
- Incurred and paid payroll costs of $208,900. Of this amount, $56,000 were indirect labor costs; direct labor personnel earned $22 per hour.
- Paid factory utility bill, $16,930 in cash.
- August’s insurance cost for the manufacturing property and equipment was $4,000. The premium had been paid in March.
- Incurred $9,150
depreciation on manufacturing equipment for August. - Recorded $2,650 depreciation on an administrative asset.
- Paid advertising expenses in cash, $5,950.
- Incurred and paid other
factory overhead costs , $14,500. - Incurred and paid miscellaneous selling and administrative expenses, $14,000.
- Applied factory overhead to production on the basis of direct labor hours.
- Produced completed goods costing $151,000 during the month.
- Sales on account in August were $137,000. The Cost of Goods Sold was $117,000.
Required:
1. Compute the firm’s predetermined factory overhead rate for the year.
2. Prepare
3. Calculate the amount of overapplied or underapplied overhead to be closed to the Cost of Goods Sold account on August 31.
4. Prepare a schedule of Cost of Goods Manufactured and Cost of Goods Sold.
5. Prepare the income statement for August.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
