lmington Chemical Company uses oil to produce two types of plastic products, P1 and P2. Wilmington budgeted 50,000 barrels of oil for purchase in June for $50 per barrel. Direct labor budgeted in the chemical process was $300,000 for June. Factory overhead was budgeted $500,000 during June. The inventories on June 1 were estimated to be: Oil $15,500 P1 25,400 P2 22,900 Work in process 3,400 The desired inventories on June 30 were: Oil $16,100 P1 28,500
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.
Wilmington Chemical Company uses oil to produce two types of plastic products, P1 and P2. Wilmington budgeted 50,000 barrels of oil for purchase in June for $50 per barrel. Direct labor budgeted in the chemical process was $300,000 for June. Factory overhead was budgeted $500,000 during June. The inventories on June 1 were estimated to be:
| Oil | $15,500 |
| P1 | 25,400 |
| P2 | 22,900 |
| Work in process | 3,400 |
The desired inventories on June 30 were:
| Oil | $16,100 |
| P1 | 28,500 |
| P2 | 25,000 |
| Work in process | 4,000 |
Use the preceding information to prepare a cost of goods sold budget for June.
Wilmington Chemical CompanyCost of Goods Sold BudgetFor the Month Ending June 30
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