Ecola Company uses a job order costing system. Manufacturing overhead is applied on the basis of direct labor cost. Total manufacturing overhead was estimated to be $120,000 for the year; direct labor was estimated to total $150,000. (1/1) (12/31) Raw Materials Inventory $ 13,000 $ 10,000 Work in Process Inventory $ 29,000 $ 22,000 Finished Goods Inventory $ 41,000 $ 32,000
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.
Ecola Company uses a
| (1/1) | (12/31) | |||||
| Raw Materials Inventory | $ | 13,000 | $ | 10,000 | ||
| Work in Process Inventory | $ | 29,000 | $ | 22,000 | ||
| Finished Goods Inventory | $ | 41,000 | $ | 32,000 | ||
The following transactions have occurred during the year.
| Raw materials purchases | $ | 100,000 |
| Direct materials used | $ | 87,000 |
| Direct labor | $ | 135,000 |
| Indirect materials used | $ | 16,000 |
| Indirect labor | $ | 19,000 |
| Factory equipment |
$ | 28,000 |
| Factory rent | $ | 15,000 |
| Factory utilities | $ | 11,500 |
| Other |
$ | 8,500 |
(a) Calculate the predetermined overhead rate.
(b) Calculate cost of goods manufactured.
(c) Calculate the over- or underapplied overhead.
(d) Calculate adjusted cost of goods sold.
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