One Stop Invitations & More does customize, hand-crafted wedding memorabilia, in which each batch of items is a job. The company has a highly labour-intensive production process, so it allocates manufacturing overhead based on direct labour hours. The business expects to incur $2,400,000 of manufacturing overhead costs and to use 40,000 direct labour hours during 20X9. At the end of June 20X9, One Stop Invitations & More reported the following inventories: Raw Materials Inventory Work-in-Progress Inventory Finished Goods Inventory $200,000 $170,000 $110,000 During July 20X9, One Stop Invitations & More actually used 3,000 direct labour hours and recorded the following transactions: i) Purchased materials on account $310,000 ii) Manufacturing wages incurred $400,000 iii) Materials requisitioned (includes $30,000 of indirect materials) $420,000 iv) Assigned manufacturing wages, 90% direct labour, 10% indirect labour v) Other manufacturing overhead incurred $130,000 vi) Allocated manufacturing overhead for July 20X9 vii) Cost of jobs completed $995,000 viii) Cost of jobs sold (on account) at a margin of 33⅓% $960,000 Answer the following: e) Compute One Stop’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance. f) Post the appropriate entries to Materials Inventory, Work-in-Process Inventory and Finished Goods Inventory accounts and determine each account balance on July 31, 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.
One Stop Invitations & More does customize, hand-crafted wedding memorabilia, in which each batch of items is a job. The company has a highly labour-intensive production process, so it allocates manufacturing
| Raw Materials Inventory Work-in-Progress Inventory Finished Goods Inventory |
$200,000 $170,000 $110,000 |
During July 20X9, One Stop Invitations & More actually used 3,000 direct labour hours and recorded the following transactions:
i) Purchased materials on account $310,000
| ii) | Manufacturing wages incurred | $400,000 |
| iii) | Materials requisitioned (includes $30,000 of indirect materials) | $420,000 |
| iv) | Assigned manufacturing wages, 90% direct labour, 10% indirect labour |
| v) | Other manufacturing overhead incurred $130,000 |
| vi) | Allocated manufacturing overhead for July 20X9 |
| vii) | Cost of jobs completed $995,000 |
| viii) | Cost of jobs sold (on account) at a margin of 33⅓% $960,000 |
Answer the following:
e) Compute One Stop’s gross profit earned on the jobs sold, after adjusting for the manufacturing overhead variance.
f)
Please follow the format given in the image attached when answering questions e & f.
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