J&W Corporation manufactures a new electronic game console. The current standard cost sheet for a game console follows. Direct materials, ? kilograms at $6 per kilogram $ ? per game Direct labor, 0.75 hours at ? per hour ? per game Overhead, 0.75 hours at ? per hour ? per game Total costs $ 39 per game
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.
Problem 16-71 (Algo) Find Actual and Budget Amounts from Variances (LO 16-5, 6)
J&W Corporation manufactures a new electronic game console. The current
| Direct materials, ? kilograms at $6 per kilogram | $ | ? | per game |
| Direct labor, 0.75 hours at ? per hour | ? | per game | |
| ? | per game | ||
| Total costs | $ | 39 | per game |
Assume that the following data appeared in J&W’s records at the end of the past month.
| Actual production | 59,000 | units | |
| Actual sales | 56,000 | units | |
| Materials (131,000 kilograms) | ? | ||
| Materials price variance | 58,000 | U | |
| Materials efficiency variance | 42,600 | U | |
| Direct labor price variance | 44,550 | U | |
| Direct labor (40,500 hours) | 741,150 | ||
| Underapplied overhead (total) | 19,900 | U | |
There are no materials inventories.
Required:
a-1. Complete the standard cost sheet for a game console given below.
a-2. Prepare a variance analysis for direct materials and direct labor.
b. Assume that all production overhead is fixed and that the $19,900 underapplied is the only overhead variance that can be computed. What are the actual and applied overhead amounts?
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