Hume, Ltd had the following production data for August: Beginning Inventory, Raw Materials: $37,000 Beginning Inventory, WIP: $49,000 (Job 2) Beginning Inventory, Finished Goods: $83,000 (Job 1) Purchases, Raw Material: $42,000 Direct Labor Rate/Hour: $32.00 Budgeted Annual Machine Hours: 27,000 Budgeted Annual Overhead Expense: $1,755,000 Hume uses normal costing and applies overhead based on machine hours. Actual Overhead Expense for August: $151,000 Job 2 Job 3 Job 4 Beginning WIP $49,000 $0 $0 Materials $9,000 $17,000 $36,000 Direct Labor Hours 625 1,170 430 Machine Hours 380 1,100 150 Jobs 3 & 4 were started in August. Jobs 2 & 3 were completed and moved to Finished Goods Inventory. Jobs 1 & 2 were sold at 25% margin over cost. Calculate the applied overhead rate Complete a job cost schedule for BI, materials, labor and overhead for jobs 2 – 4 Calculate ending inventory balances for Materials, WIP and Finished Goodsf
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.
Hume, Ltd had the following production data for August:
Beginning Inventory, Raw Materials: $37,000
Beginning Inventory, WIP: $49,000 (Job 2)
Beginning Inventory, Finished Goods: $83,000 (Job 1)
Purchases, Raw Material: $42,000
Direct Labor Rate/Hour: $32.00
Budgeted Annual Machine Hours: 27,000
Budgeted Annual
Hume uses normal costing and applies overhead based on machine hours.
Actual Overhead Expense for August: $151,000
|
|
Job 2 |
Job 3 |
Job 4 |
|
Beginning WIP |
$49,000 |
$0 |
$0 |
|
Materials |
$9,000 |
$17,000 |
$36,000 |
|
Direct Labor Hours |
625 |
1,170 |
430 |
|
Machine Hours |
380 |
1,100 |
150 |
Jobs 3 & 4 were started in August.
Jobs 2 & 3 were completed and moved to Finished Goods Inventory.
Jobs 1 & 2 were sold at 25% margin over cost.
- Calculate the applied overhead rate
- Complete a
job cost schedule for BI, materials, labor and overhead for jobs 2 – 4 - Calculate ending inventory balances for Materials, WIP and Finished Goodsf
- Calculate Cost of Goods Sold
- Calculate Gross Margin in dollars
- Calculate the overhead variance. State whether actual overhead costs were greater or less than applied overhead amounts.
- Re-state Gross Margin after accounting for the overhead variance.
Hi student
Since there are multiple subparts asked, we will answer only first three subparts.
Overheads means all type of indirect costs being incurred in business. These costs can not be allocated direclty to products and services, as these needs to be allocated by using some reasonable basis.
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