Required: 1. Compute Fielder’s predetermined manufacturing overhead rate for 2020. 2. Calculate the gross profit earned by Fielder. 3. Determine the balance in work in process inventory on February 29.
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.
The Fielder manufacturing company uses job order costing system. The company uses machine hours to apply
The following activities took place in the work in process inventory during February:
WIP Inventory A/C
February 1 Bal. b/f 51,250 Direct Materials Used 256,400
Other transactions incurred:
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Indirect material issued to production was $38,000
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Total manufacturing labour incurred in February was $345,000, 80% of this amount represented direct labour.
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Other
manufacturing overhead costs incurred for February amounted to $340,750. -
Two jobs were completed with total costs of $324,000 & $240,000 respectively. They
were sold on account at a margin of 40% on sales.
Required:
1. Compute Fielder’s predetermined manufacturing overhead rate for 2020.
2. Calculate the gross profit earned by Fielder.
3. Determine the balance in work in process inventory on February 29.
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