Problem 6. Lumpini Corp. had $390,000 of actual factory overhead and $355,000 of applied overhead. Their Direct Material, WIP, Finished Goods, COGS, and Gross Profit had the following balances: $400,000, $200,000, $300,000, $500,000 and $250,000 respectively. Required: -Use the pro-rated methodology to dispose of the variance. - What is the adjusted gross profit after accounting for the variance.
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.
Problem 6.
Lumpini Corp. had $390,000 of actual factory
Required:
-Use the pro-rated methodology to dispose of the variance.
- What is the adjusted gross profit after accounting for the variance.
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