t labor dollars $ 100,500 Rate per direct labor dollar 200 % The company’s actual costs incurred during the year are as follows: Incurred by Jobs
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.
Work-in-Process Inventory for Carston Inc. at the beginning of the year was a single job, Job T114:
| Job # | Direct Materials | Direct Labor | Overhead | Total | ||||||||
| T114 | $ | 37,500 | $ | 19,250 | $ | 31,750 | $ | 88,500 | ||||
The company’s budgeted costs for the year are as follows:
| Budgeted overhead | |||
| Variable | |||
| Indirect materials | $ | 74,000 | |
| Indirect labor | 62,000 | ||
| Employee benefits | 31,000 | ||
| Fixed | |||
| Supervision | 16,000 | ||
| 18,000 | |||
| Total | $ | 201,000 | |
| Budgeted direct labor dollars | $ | 100,500 | |
| Rate per direct labor dollar | 200 | % | |
The company’s actual costs incurred during the year are as follows:
| Incurred by Jobs | ||||||||||||||
| Job # | Materials | Labor | Other | Total | ||||||||||
| T114 | $ | 3,200 | $ | 11,200 | $ | - | $ | 14,400 | ||||||
| T119 | 25,200 | 20,400 | - | 45,600 | ||||||||||
| T133 | 9,200 | 37,000 | - | 46,200 | ||||||||||
| T136 | 2,200 | 17,800 | - | 20,000 | ||||||||||
| $ | 39,800 | $ | 86,400 | $ | 126,200 | |||||||||
| Incurred by Jobs | |||||||||||||||
| Overhead | Materials | Labor | Other | Total | |||||||||||
| Indirect materials and supplies | 64,800 | - | - | 64,800 | |||||||||||
| Indirect labor | - | 54,800 | - | 54,800 | |||||||||||
| Employee benefits | - | - | 37,200 | 37,200 | |||||||||||
| Depreciation | - | - | 18,000 | 18,000 | |||||||||||
| Supervision | - | 13,800 | - | 13,800 | |||||||||||
| Total | $ | 64,800 | $ | 68,600 | $ | 55,200 | $ | 188,600 | |||||||
Required:
1. What was the actual factory overhead for Carston Inc. for the year?
2. What was overapplied or underapplied overhead for the year?
3. Job T114 was the only job completed and sold in the year. What amount was included in the Cost of Goods Sold account for this job?
4. What was the amount of Work-in-Process Inventory at the end of the year?
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