Stellar Sound, Inc., which uses a job-order costing system, had two jobs in process at the start of 20x1: job no. 64 ($84,000) and job no. 65 ($53,500). The following information is available: The company applies manufacturing overhead on the basis of machine hours (based on practical capacity). Budgeted overhead and machine activity for the year were anticipated to be $840,000, and 16,000 hours, respectively" "The company worked on four jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were as follows: Job No. Direct Material Direct Labor Machine Hours 64 .....................................$21,000…………….$35,000…………1,200 65 ...................................—………………….….22,000………….700 66 ......................................44,000……………….65,000…………2,000 67 ......................................15,000………………..8,800……………500 Manufacturing overhead during the first quarter included charges for depreciation ($34,000), indi-rect labor ($60,000), indirect materials used ($5,000), and other factory costs ($139,500). Stellar Sound completed job no. 64 and job no. 65. Job no. 65 was sold on account, producing a profit of $34,700 for the firm. Required: 1.Determine the company’s predetermined overhead application rate. 2.Prepare journal entries as of March 31 to record the following. (Note: Use summary entries where appropriate by combining individual job data.) The issuance of direct material to production and the direct labor incurred. The manufacturing overhead incurred during the quarter. The application of manufacturing overhead to production. The completion of jobs no. 64 and no. 65. The sale of job no. 65. 3.Determine the cost of the jobs still in production as of March 31.
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.
"Stellar Sound, Inc., which uses a
- The company applies manufacturing
overhead on the basis of machine hours (based on practical capacity). Budgeted overhead and machine activity for the year were anticipated to be $840,000, and 16,000 hours, respectively" - "The company worked on four jobs during the first quarter. Direct materials used, direct labor incurred, and machine hours consumed were as follows:
Job No. Direct Material Direct Labor Machine Hours
64 .....................................$21,000…………….$35,000…………1,200
65 ...................................—………………….….22,000………….700
66 ......................................44,000……………….65,000…………2,000
67 ......................................15,000………………..8,800……………500
- Manufacturing overhead during the first quarter included charges for
depreciation ($34,000), indi-rect labor ($60,000), indirect materials used ($5,000), and otherfactory costs ($139,500). - Stellar Sound completed job no. 64 and job no. 65. Job no. 65 was sold on account, producing a profit of $34,700 for the firm.
Required:
1.Determine the company’s predetermined overhead application rate.
2.Prepare
- The issuance of direct material to production and the direct labor incurred.
- The manufacturing overhead incurred during the quarter.
- The application of manufacturing overhead to production.
- The completion of jobs no. 64 and no. 65.
- The sale of job no. 65.
3.Determine the cost of the jobs still in production as of March 31.
4.Did the finished-goods inventory increase or decrease during the first quarter? By how much?
5.Was manufacturing overhead under- or overapplied for the first quarter of the year? By how much"
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