The following cost data relate to the manufacturing activities of Green Company Manufacturing overhead costs incurred during the year: Indirect labor P118,000 Depreciation, factory 48,000 Insurance, factory 12,000 Utilities, factory 10,000 Property taxes 9,000 Total actual costs P197,000 Other costs incurred during the year: Purchases of raw materials Direct labor cost P256,000 320,000 Inventories: Raw materials, January 1 Raw materials, December 31 Work in process, January Work in process, December 31 P16,000 14,000 12,000 15,000 The company uses a predetermined overhead rate to charge overhead cost to production. The rate for the year was P20 per machine-hour; a total of 10,000 machine-hours was recorded for the year. Required Compute the amount of under or over applied overhead cost for the year. Prepare a schedule of cost of goods manufactured for the year.
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 following cost data relate to the manufacturing activities of Green
Company
Indirect labor
P118,000
48,000
Insurance, factory
12,000
Utilities, factory
10,000
Property taxes
9,000
Total actual costs
P197,000
Other costs incurred during the year:
Purchases of raw materials
Direct labor cost
P256,000
320,000
Inventories:
Raw materials, January 1
Raw materials, December 31
Work in process, January Work in process, December 31
P16,000
14,000
12,000
15,000
The company uses a predetermined overhead rate to charge overhead cost to production. The rate for the year was P20 per machine-hour; a total of 10,000 machine-hours was recorded for the year.
Required
- Compute the amount of under or over applied overhead cost for the year.
- Prepare a schedule of cost of goods manufactured for the year.
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