STANDARD COST SYSTEM – MOH VARIANCES (must show calculations) Company budgeted production level in units is 60,000 units of output with a budgeted fixed cost of $480,000 and budgeted variable cost of $348,000. Each unit requires 2 hours of direct labor. (Use T accounts to help yourself) Actual results: Production: 58,500 units Direct labor hours used: 128,700 Total actual MOH costs incurred: $819,228 Total actual FIXED MOH costs incurred: $480,643 Calculate the standard (budgeted) VMOH cost per unit and per hour: VMOH per unit: $__________________ VMOH per hour: $_________________ Calculate the standard (budgeted) FMOH cost per unit and per hour: FMOH per unit: $___________________
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.
Company budgeted production level in units is 60,000 units of output with a budgeted fixed cost of $480,000 and budgeted variable cost of $348,000. Each unit requires 2 hours of direct labor. (Use T accounts to help yourself)
Actual results:
Production: 58,500 units
Direct labor hours used: 128,700
Total actual MOH costs incurred: $819,228
Total actual FIXED MOH costs incurred: $480,643
- Calculate the standard (budgeted) VMOH cost per unit and per hour:
VMOH per unit: $__________________
VMOH per hour: $_________________
- Calculate the standard (budgeted) FMOH cost per unit and per hour:
FMOH per unit: $___________________
FMOH per hour: $___________________
- Calculate the standard VMOH allocated to production during the year and prepare
journal entry :
VMOH Allocated: $_____________________
- Calculate the standard FMOH allocated to production during the year and prepare journal entry:
FMOH Allocated $_______________________
MOH VARIANCES (indicate whether favorable (F) or unfavorable (U):
5A. Calculate the total VMOH variance:
Total VMOH VAR. $__________
5B. Calculate the VMOH spending (price) variance:
VMOH Spending Var.: $_____________U F
5C. Calculate the VMOH efficiency (quantity) variance:
VMOH Efficiency Var.: $____________U F
6A Calculate the total FMOH variance:
Total FMOH VAR. $________
6B Calculate FMOH Spending variance:
FMOH Spending Var.: $____________U F
6C Calculate FMOH Volume variance:
FMOH Volume Var.: $_____________U F
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