Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production 152,000 Fixed manufacturing overhead cost $ 659,000 Variable manufacturing overhead cost per machine-hour
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.
Kody Corporation uses a
| Machine-hours required to support estimated production | 152,000 | |
| Fixed manufacturing overhead cost | $ | 659,000 |
| Variable manufacturing overhead cost per machine-hour | $ | 4.40 |
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Required:
1. Compute the predetermined overhead rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)
2. During the year Job 500 was started and completed. The following information was available with respect to this job:
| Direct materials requisitioned | $ | 300 |
| Direct labor cost | $ | 240 |
| Machine-hours used | 37 | |
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Compute the total
3-a. During the year the company worked a total of 145,100 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,272,174. What is the amount of underapplied or overapplied overhead for the year? (Round your intermediate calculations to 2 decimal places.)
3-b. If this amount were closed out entirely to Cost of Goods Sold, would net operating income increase or decrease?
| Increase | |
| Decrease |
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