The Principles Corporation is a manufacturer of centrifuges. Fixed and variable manufacturing overheads are allocated to each centrifuge using budgeted assembly-hours. Budgeted assembly time is 2 hours per unit. The following table shows the budgeted amounts and actual results related to overhead for June 2021. Planned (budgeted) output 110 units Actual production 225 units Actual hours of assembly time 360 hours Variable manufacturing overhead allocation rate $32.00 per assembly hour Actual variable manufacturing overhead $11,933 Fixed variable manufacturing overhead budgeted $10,780 Fixed variable manufacturing overhead incurred $12,180 Required: 1. Prepare an analysis of all variable manufacturing overhead and fixed manufacturing overhead variances using the following table. The Principles Corporation (June 2021) Actual Flexible Budget Static Budget Outputs units (number of assembled units) 225 225 110 Hours of assembly time Assembly hours per unit 2.00 2.00 Variable mfg. overhead cost per hour of assembly time Variable mfg. overhead costs Fixed mfg. overhead costs Fixed mfg. overhead costs per hour of assembly time Compute spending and efficiency variances for variable overhead. Compute the spending variance and production-volume variance for fixed overhead. 2. Prepare journal entries for Principles’ June 2021 variable and fixed manufacturing overhead costs and variances; write off these variances to cost of goods sold for the quarter ending June 30, 2021.
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 Principles Corporation is a manufacturer of centrifuges. Fixed and variable manufacturing
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