Bradford Company uses a job-order costing system and has two manufacturing departments: Molding and Fabrication. The company provided the following estimates at the beginning of the year: Molding Fabrication Total Machine-hours 15 000 29 000 44 000 Fixed manufacturing overhead cost $ 450 000,00 $ 250 000,00 $ 700 000,00 Variable manufacturing overhead cost per machine-hour
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.
Bradford Company uses a
|
|
Molding |
Fabrication |
Total |
|
Machine-hours |
15 000 |
29 000 |
44 000 |
|
Fixed |
$ 450 000,00 |
$ 250 000,00 |
$ 700 000,00 |
|
Variable manufacturing overhead cost per machine-hour |
$ 4,50 |
$ 4,50 |
|
During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job A and Job B. It provided the following information related to those two jobs:
|
Job A |
Molding |
Fabrication |
Total |
|
Direct materials cost |
$ 425 000,00 |
$ 285 000,00 |
$ 710 000,00 |
|
Direct labor cost |
$ 290 000,00 |
$ 90 000,00 |
$ 380 000,00 |
|
Machine-hours |
8 000 |
9 000 |
17 000 |
|
Job B |
Molding |
Fabrication |
Total |
|
Direct materials cost |
$ 310 000,00 |
$ 245 000,00 |
$ 555 000,00 |
|
Direct labor cost |
$ 195 000,00 |
$ 212 000,00 |
$ 407 000,00 |
|
Machine-hours |
7 000 |
20 000 |
27 000 |
Bradford had no underapplied or overapplied manufacturing overhead during the year
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