Red Company uses normal costing. During the year ended December 31, 2019, the following information were made available: Total manufacturing costs incurred during the year, P2,200,00o; Cost of goods manufactured amounted to P1,940,000; Factory Overhead is applied to production at 80% of direct labor cost; Applied Factory Overhead during the year amounted to 30% of total manufacturing cost; Beginning work-in-process inventory was 75% of the work-in-process at the end. Compute for the cost of direct materials used for the year ended December 31, 2019.
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.
Red Company uses normal costing. During the year ended December 31, 2019, the following information were made available: Total manufacturing costs incurred during the year, P2,200,00o; Cost of goods manufactured amounted to P1,940,000; Factory Overhead is applied to production at 80% of direct labor cost; Applied Factory Overhead during the year amounted to 30% of total manufacturing cost; Beginning work-in-process inventory was 75% of the work-in-process at the end. Compute for the cost of direct materials used for the year ended December 31, 2019.
Step by step
Solved in 3 steps