CRAZY Co, is a major producer of beauty products. The company uses a standard cost system to help control costs. Manufacturing overhead is applied to production on the basis of standard direct labor-hours. The company has a standard of 10 labor hours per unit. According to the company’s planning budget, the following manufacturing overhead costs should be incurred at an activity level of 17,500 labor-hours (the denominator activity level): Variable manufacturing overhead cost . . . . . $ 175,000 Fixed manufacturing overhead cost . . . . . . . $420,000 Total manufacturing overhead cost . . . . . . . . $595,000 During the most recent year, the following operating results were recorded: Activity: Actual Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600 Total Actual labor-hours worked . . . . . . . . . . . . . . . . . . . . . . . 15,000 Cost: Actual variable manufacturing overhead cost incurred . . . . . $156,000 Actual fixed manufacturing overhead cost incurred . . . . . . . . $418,800 Required: Calculate the standard fixed manufacturing overhead rate and variable manufacturing overhead rate. Compute spending and efficiency variances for variable overhead. Compute the spending variance and production-volume variance for fixed overhead. Prepare journal entries for variable and fixed manufacturing overhead costs and variances; write off these variances to cost of goods sold.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
CRAZY Co, is a major producer of beauty products. The company uses a
According to the company’s planning budget, the following
Variable manufacturing overhead cost . . . . . $ 175,000 Fixed manufacturing overhead cost . . . . . . . $420,000 Total manufacturing overhead cost . . . . . . . . $595,000
During the most recent year, the following operating results were recorded: Activity:
Actual Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,600 Total Actual labor-hours worked . . . . . . . . . . . . . . . . . . . . . . . 15,000
Cost:
Actual variable manufacturing overhead cost incurred . . . . . $156,000 Actual fixed manufacturing overhead cost incurred . . . . . . . . $418,800
Required:
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Calculate the standard fixed manufacturing overhead rate and variable manufacturing overhead rate.
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Compute spending and efficiency variances for variable overhead.
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Compute the spending variance and production-volume variance for fixed overhead.
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Prepare
journal entries for variable and fixed manufacturing overhead costs and variances;write off these variances to cost of goods sold.
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