Epsilon Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2018, they estimated total manufacturing overhead costs at $1,015,000, and they estimated total direct labor costs at $1,400,000. The administration and selling overheads are to be absorbed in each job cost at 15% of production cost. Distribution cost should be added to each job according to quotes from outside carriage companies. The company wishes to quote for job # W500. Data for the job are as follows: Direct materials cost $169,450 Direct labour cost $230,000 Direct labour hours 400 hours Special Design Cost $12,300 Distribution quote from haulage company $17,930 Units of product produced 250 crates a) Compute Epsilon Manufacturing Company predetermined manufacturing overhead rate for 2018. b) How much manufacturing overhead was allocated to Job #W500? c) Calculate the total cost & quotation price of Job #W500, given that a margin of 25% is applied.
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.
Discussion Question
Epsilon Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2018, they estimated total
The administration and selling
The company wishes to quote for job # W500. Data for the job are as follows:
Direct materials cost $169,450
Direct labour cost $230,000
Direct labour hours 400 hours
Special Design Cost $12,300
Distribution quote from haulage company $17,930
Units of product produced 250 crates
a) Compute Epsilon Manufacturing Company predetermined manufacturing overhead rate for 2018.
b) How much manufacturing overhead was allocated to Job #W500?
c) Calculate the total cost & quotation price of Job #W500, given that a margin of 25% is applied.
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