Brando Company's fiscal year runs from July 1 to June 30. The company uses job order accounting system for its production costs. A predetermined overhead rate based upon direct labor hours is used to apply overhead to individuals jobs. A flexible budget for overhead costs a prepared for the year as shown below: Direct Labor Hours P100,000 P120,000 P140,000 Variable Overhead Cost 325,000 390,000 455,000 Fixed Overhead Cost 216,000 216,000 216,000 Total Overhead 541,000 606,000 671,000
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.
Brando Company's fiscal year runs from July 1 to June 30. The company uses job order accounting system for its production costs. A predetermined
| Direct Labor Hours | P100,000 | P120,000 | P140,000 |
| Variable Overhead Cost | 325,000 | 390,000 | 455,000 |
| Fixed Overhead Cost | 216,000 | 216,000 | 216,000 |
| Total Overhead | 541,000 | 606,000 | 671,000 |
Although the annual ideal capacity is 150,000 direct labor hours, company officials have determined 120,000 direct labor hours to be the normal capacity for the year.
The information presented below is for November. Jobs 8350 and 8351 were completed during November.
Inventories, November 1
| Raw Materials and supplies | P10,500 |
| Work in Process Job 8350 | 54,000 |
| Finished Goods | 112,500 |
Materials and supplies requisitioned for production.
| Job 8350 | P45,000 |
| Job 8351 | 37,500 |
| Job 8352 | 25,500 |
| Supplies | 12,000 |
Factory Direct Labor Hours
| Job 8350 | 3,500 |
| Job 8351 | 3,000 |
| Job 8352 | 2,000 |
Labor Costs
| Direct labor Wages | P51,000 |
| Indirect labor wages (4,000 hours) | 15,000 |
| Supervisor salaries | 6,000 |
Building occupancy costs (heat, light, depreciation)
| Factory facilities | P6,500 |
| Salary Offices | 1,500 |
| Administrative offices | 1,000 |
Purchases of raw materials and supplies
| Raw Materials | P135,000 |
| Supplies | 15,000 |
Factory equipment costs
| Power | P4,000 |
| Repairs and maintenance | 1,500 |
| Depreciation | 1,500 |
| Other | 1,000 |
Questions:
1. The predetermined overhead rate to be used to apply overhead to individual jobs during the fiscal year is?
2. Assume the predetermined overhead rate is P4.50 per direct labor hour. Use this amount in answer to the next question. The total cost of Job 8350 is?
3. The
4. The total amount of overhead applied to job during November was?
5. Actual factory overhead incurred during November was?
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4. The total amount of
5. Actual factory overhead incurred during November was?
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