Kalp Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
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.
Kalp Corporation has two production departments, Machining and Finishing. The company uses a
| Machining | Finishing | |||
| Machine-hours | 19,000 | 12,000 | ||
| Direct labor-hours | 2,000 | 8,000 | ||
| Total fixed |
$ | 136,800 | $ | 69,600 |
| Variable manufacturing overhead per machine-hour | $ | 1.80 | ||
| Variable manufacturing overhead per direct labor-hour | $ | 3.20 |
During the current month the company started and finished Job K928. The following data were recorded for this job:
| Job K928: | Machining | Finishing | ||
| Machine-hours | 90 | 10 | ||
| Direct labor-hours | 30 | 50 | ||
| Direct materials | $ | 775 | $ | 415 |
| Direct labor cost | $ | 630 | $ | 1,050 |
The predetermined overhead rate for the Machining Department is closest to
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
