Carib Tings & More does hand-crafted memorabilia for the tourism industry, in which each batch of items is a job. The company has a highly machine intensive production process, so it allocates manufacturing overhead based on machine hours. Carib Tings & More pre-determined overhead application rate for 2024 was computed from the following data: Total estimated factory overheads $2,400,000 Total estimated machine hours 40,000 At the end of May 2024, Carib Tings & More reported work in process inventory of $176,000. During June 2024, Carib Tings & More actually used 3,000 machine hours and recorded the following transactions. i) Purchased $324,000 worth of materials on account. Separately, Carib Tings & More paid a $2,500 bill for freight in. ii) Manufacturing wages incurred $400,000 iii) Materials requisitioned (includes $30,000 of indirect materials) $420,000 iv) Assigned manufacturing wages, 85% direct labour, 15% indirect labour v) Depreciation expense on factory equipment used on the different jobs $95,000 vi) Other manufacturing overhead incurred $35,000 vii) Allocated manufacturing overhead for June 2024 viii) Cost of jobs completed $1,015,000 ix) Cost of jobs sold (on account) at a margin of 33⅓% on sales $985,000 1. Assume Carib uses the perpetual inventory system and state the journal entries necessary to record the above transactions in the general journal then compute the balance in the Cost of Goods Sold account after the adjustment. 2. Compute Carib’s gross profit earned on the jobs completed and sold, after adjusting for the manufacturing overhead variance. 3. Post the appropriate entries to Work in Process Inventory Control account & determine the account balance on June 30, the end of the month.
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.
Carib Tings & More does hand-crafted memorabilia for the tourism industry, in which each batch of
items is a job. The company has a highly machine intensive production process, so it allocates
manufacturing overhead based on machine hours. Carib Tings & More pre-determined overhead
application rate for 2024 was computed from the following data:
Total estimated factory
Total estimated machine hours 40,000
At the end of May 2024, Carib Tings & More reported work in process inventory of $176,000.
During June 2024, Carib Tings & More actually used 3,000 machine hours and recorded the
following transactions.
i) Purchased $324,000 worth of materials on account. Separately, Carib Tings &
More paid a $2,500 bill for freight in.
ii) Manufacturing wages incurred $400,000
iii) Materials requisitioned (includes $30,000 of indirect materials) $420,000
iv) Assigned manufacturing wages, 85% direct labour, 15% indirect labour
v)
vi) Other manufacturing overhead incurred $35,000
vii) Allocated manufacturing overhead for June 2024
viii) Cost of jobs completed $1,015,000
ix) Cost of jobs sold (on account) at a margin of 33⅓% on sales $985,000
1. Assume Carib uses the perpetual inventory system and state the
2. Compute Carib’s gross profit earned on the jobs completed and sold, after adjusting for the
manufacturing overhead variance.
3.
balance on June 30, the end of the month.
Step by step
Solved in 6 steps
In step 3, how did you arrive at 125,000 for the adjustment?
by Bartleby Expert
