Ware Manufacturing Company produced 2,000 units of inventory in January, Year 2. It expects to produce an additional 14,000 units during the remaining 11 months of the year. In other words, total production for year 2 is estimated to be 16,000 units. Direct materials and direct labor costs are $64 and $52 per unit, respectively. Ware expects to incur the following manufacturing overhead costs during the year 2 accounting period. Production supplies $ 20,000 Supervisor salary 160,000 Depreciation on equipment 75,000 Utilities 20,000 Rental fee on manufacturing facilities 45,000 Required Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units. Determine the cost of the 2,000 units of product made in January.
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.
Ware Manufacturing Company produced 2,000 units of inventory in January, Year 2. It expects to produce an additional 14,000 units during the remaining 11 months of the year. In other words, total production for year 2 is estimated to be 16,000 units. Direct materials and direct labor costs are $64 and $52 per unit, respectively. Ware expects to incur the following
| Production supplies | $ | 20,000 | |
| Supervisor salary | 160,000 | ||
| 75,000 | |||
| Utilities | 20,000 | ||
| Rental fee on manufacturing facilities | 45,000 | ||
Required
-
Combine the individual overhead costs into a cost pool and calculate a predetermined overhead rate assuming the cost driver is number of units.
-
Determine the cost of the 2,000 units of product made in January.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
