The following information pertains to Trenton Glass Works for the year just ended. Budgeted direct-labor cost: 75,000 hours (practical capacity) at $16 per hour Actual direct-labor cost: 80,000 hours at $17.50 per hour Budgeted manufacturing overhead: $997,500 Actual selling and administrative expenses: 435,000 Actual manufacturing overhead: Depreciation ................................................................................................ $231,000 Property taxes ............................................................................................. 21,000 Indirect labor ............................................................................................... 82,000 Supervisory salaries .................................................................................... 200,000 Utilities........................................................................................................ 59,000 Insurance ..................................................................................................... 30,000 Rental of space ............................................................................................ 300,000 Indirect material (see data below) .............................................................. 79,000 Indirect material: Beginning inventory, January 1 .................................................................. 48,000 Purchases during the year............................................................................ 94,000 Ending inventory, December 31 ................................................................. 63,000 Required: 1. Compute the firm’s predetermined overhead rate, which is based on direct-labor hours. 2. Calculate the overapplied or underapplied overhead for the year. 3. Prepare a journal entry to close out the Manufacturing Overhead account into Cost of Goods Sold.
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 information pertains to Trenton Glass Works for the year just ended.
Budgeted direct-labor cost: 75,000 hours (practical capacity) at $16 per hour
Actual direct-labor cost: 80,000 hours at $17.50 per hour
Budgeted manufacturing
Actual selling and administrative expenses: 435,000
Actual manufacturing overhead:
Property taxes ............................................................................................. 21,000
Indirect labor ............................................................................................... 82,000
Supervisory salaries .................................................................................... 200,000
Utilities........................................................................................................ 59,000
Insurance ..................................................................................................... 30,000
Rental of space ............................................................................................ 300,000
Indirect material (see data below) .............................................................. 79,000
Indirect material:
Beginning inventory, January 1 .................................................................. 48,000
Purchases during the year............................................................................ 94,000
Ending inventory, December 31 ................................................................. 63,000
Required:
1. Compute the firm’s predetermined overhead rate, which is based on direct-labor hours.
2. Calculate the overapplied or underapplied overhead for the year.
3. Prepare a
Sold.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
