Sorrento Products uses a job costing accounting system for its manufacturing costs. A predetermined overhead rate based on machine-hours is used to apply overhead to individual jobs. An estimate of overhead costs at different volumes was prepared for the current year as follows. Machine-hours 198,000 212,000 258,000 Variable overhead costs $ 752,400 $ 805,600 $ 980,400 Fixed overhead costs 1,780,800 1,780,800 1,780,800 Total overhead $ 2,533,200 $ 2,586,400 $ 2,761,200 The expected volume is 212,000 machine-hours for the entire year. The following information is for March, when Jobs 302 and 304 were completed: Inventories, March 1 Raw materials and supplies $ 92,900 Work in process (Job 302) 198,500 Finished goods 499,000 Purchases of raw materials and supplies Raw materials $ 1,363,400 Supplies 177,200 Materials and supplies requisitioned for production Job 302 $ 621,500 Job 304 526,300 Job 305 119,700 Supplies 34,800 $ 1,302,300 Machine-hours (MH) Job 302 6,700 MH Job 304 6,600 MH Job 305 4,000 MH Direct labor-hours (DLH) Job 302 9,200 DLH Job 304 4,000 DLH Job 305 2,400 DLH Labor costs Direct labor wages (all hours @ $32.00) $ 499,200 Indirect labor wages (1,100 hours) 22,000 Supervisory salaries 29,400 Building occupancy costs (heat, light, depreciation, etc.) Factory facilities $ 29,700 Sales and administrative offices 31,900 Factory equipment costs Power $ 48,000 Repairs and maintenance 17,840 Other 23,400 $ 89,240 Required: A. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year. (Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $13.20 per machine-hour. Use this amount in answering requirements [b] through [f], as needed.) B. Compute the total cost of Job 302 when it is finished. C. How much of factory overhead cost was applied to Job 305 during March? D. What total amount of overhead was applied to jobs during March? E. Compute actual factory overhead incurred during March. F. At the end of the year, Sorrento Products had the following account balances: Balance Overapplied overhead $ 1,704,000 Work-in-process inventory 2,653,200 Finished goods inventory 964,800 Cost of goods sold 20,502,000 Show the overapplied overhead effect on the account balances (final balances after allocation) in the following table.
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.
NEED A, B, C, D, E, AND F.
Sorrento Products uses a
| Machine-hours | 198,000 | 212,000 | 258,000 |
|---|---|---|---|
| Variable overhead costs | $ 752,400 | $ 805,600 | $ 980,400 |
| Fixed overhead costs | 1,780,800 | 1,780,800 | 1,780,800 |
| Total overhead | $ 2,533,200 | $ 2,586,400 | $ 2,761,200 |
The expected volume is 212,000 machine-hours for the entire year. The following information is for March, when Jobs 302 and 304 were completed:
| Inventories, March 1 | ||
|---|---|---|
| Raw materials and supplies | $ 92,900 | |
| Work in process (Job 302) | 198,500 | |
| Finished goods | 499,000 | |
| Purchases of raw materials and supplies | ||
| Raw materials | $ 1,363,400 | |
| Supplies | 177,200 | |
| Materials and supplies requisitioned for production | ||
| Job 302 | $ 621,500 | |
| Job 304 | 526,300 | |
| Job 305 | 119,700 | |
| Supplies | 34,800 | |
| $ 1,302,300 | ||
| Machine-hours (MH) | ||
| Job 302 | 6,700 | MH |
| Job 304 | 6,600 | MH |
| Job 305 | 4,000 | MH |
| Direct labor-hours (DLH) | ||
| Job 302 | 9,200 | DLH |
| Job 304 | 4,000 | DLH |
| Job 305 | 2,400 | DLH |
| Labor costs | ||
| Direct labor wages (all hours @ $32.00) | $ 499,200 | |
| Indirect labor wages (1,100 hours) | 22,000 | |
| Supervisory salaries | 29,400 | |
| Building occupancy costs (heat, light, |
||
| Factory facilities | $ 29,700 | |
| Sales and administrative offices | 31,900 | |
| Factory equipment costs | ||
| Power | $ 48,000 | |
| Repairs and maintenance | 17,840 | |
| Other | 23,400 | |
| $ 89,240 |
Required:
A. Compute the predetermined overhead rate (combined fixed and variable) to be used to apply overhead to individual jobs during the year.
(Note: Regardless of your answer to requirement [a], assume that the predetermined overhead rate is $13.20 per machine-hour. Use this amount in answering requirements [b] through [f], as needed.)
B. Compute the total cost of Job 302 when it is finished.
C. How much of
D. What total amount of overhead was applied to jobs during March?
E. Compute actual factory overhead incurred during March.
F. At the end of the year, Sorrento Products had the following account balances:
| Balance | |
|---|---|
| Overapplied overhead | $ 1,704,000 |
| Work-in-process inventory | 2,653,200 |
| Finished goods inventory | 964,800 |
| Cost of goods sold | 20,502,000 |
Show the overapplied overhead effect on the account balances (final balances after allocation) in the following table.
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