Dream Makers is a small manufacturer of gold and platinum jewelry. It uses a job costing system that applies overhead on the basis of direct labor hours. Budgeted factory overhead for the year was $465,800, and management budgeted 34,000 direct labor-hours. The company had no Materials, Work-in-Process, or Finished Goods Inventory at the beginning of April. These transactions were recorded during April: April insurance cost for the manufacturing property and equipment was $1,850. The premium had been paid in January. Recorded $1,060 depreciation on an administrative asset.
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.
Dream Makers is a small manufacturer of gold and platinum jewelry. It uses a
April insurance cost for the manufacturing property and equipment was $1,850. The premium had been paid in January.
Recorded $1,060
Purchased 21 pounds of high-grade polishing materials at $16 per pound (indirect materials).
Paid factory utility bill, $6,550, in cash.
Incurred 4,000 hours and paid payroll costs of $160,000. Of this amount, 1,000 hours and $20,000 were indirect labor costs.
Incurred and paid other
Purchased $25,000 of materials. Direct materials included unpolished semiprecious stones and gold. Indirect materials included supplies and polishing materials.
Requisitioned $19,000 of direct materials and $1,700 of indirect materials from Materials Inventory.
Incurred miscellaneous selling and administrative expenses, $5,800.
Incurred $3,610 depreciation on manufacturing equipment for April.
Paid advertising expenses in cash, $2,725.
Applied factory overhead to production on the basis of direct labor hours.
Completed goods costing $64,500 during the month.
Made sales on account in April, $58,620. The Cost of Goods Sold was $48,700.
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