Saktanmokobaybeh Company uses standard costing for direct materials and direct labor. The following monthly cost functions were developed for manufacturing overhead items: Budgeted Overhead Item Cost Function: Indirect materials P 1.00 per DLH Indirect labor 1.25 per DLH Utilities 0.50 per DLH Insurance 50,000 Depreciation 400,000 The cost functions were determined using observations from 20,000 to 30,000 direct labor hours. The company expects to operate at 25,000 direct labor hours per month. The theoretical capacity per month of the company is 30,000 units. Each unit requires 2 direct labor hours. The Company applies overhead using direct labor hours. Actual data for this month are as follows: Variable overhead costs P 87,000 Fixed overhead costs 423,000 Direct labor hours 26,000 Question 1: The entry pertaining to the volume variance if the standard direct labor hours allowed for this month was 24,000 will include a debit/(credit) to manufacturing overehead amounting to? (USE NEGATIVE SIGN IF CREDIT) Question 2: How much is the variable spending variance if 17,500 units were produced? Question 3: If 13,000 units were produced during the month. How much overhead costs were debited to the Work-in-Process Inventory?
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.
Saktanmokobaybeh Company uses
Budgeted Overhead Item Cost Function:
Indirect materials P 1.00 per DLH
Indirect labor 1.25 per DLH
Utilities 0.50 per DLH
Insurance 50,000
The cost functions were determined using observations from 20,000 to 30,000 direct labor hours. The company expects to operate at 25,000 direct labor hours per month. The theoretical capacity per month of the company is 30,000 units. Each unit requires 2 direct labor hours. The Company applies overhead using direct labor hours.
Actual data for this month are as follows:
Variable overhead costs P 87,000
Fixed overhead costs 423,000
Direct labor hours 26,000
Question 1: The entry pertaining to the volume variance if the standard direct labor hours allowed for this month was 24,000 will include a debit/(credit) to manufacturing overehead amounting to? (USE NEGATIVE SIGN IF CREDIT)
Question 2: How much is the variable spending variance if 17,500 units were produced?
Question 3: If 13,000 units were produced during the month. How much overhead costs were debited to the Work-in-Process Inventory?
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