Maple Mount Fishery is a canning company in Astoria. The company uses a normal costing system in which factory overhead is applied on the basis of direct labor costs. Budgeted factory overhead for the year was $680,000, and management budgeted $343,000 of direct labor costs. During the year, the company incurred the following actual costs. Direct materials used $385,000 Direct labor 306,000 Factory overhead 653,500 The January 1 balances of inventory accounts are shown below. Materials — all direct $61,900 Work-in-process 40,500 Finished goods 26,800 The December 31 balances of these inventory accounts were ten percent lower than the balances at the beginning of the year. The amount of direct materials purchased during the year is:
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.
Maple Mount Fishery is a canning company in Astoria. The company uses a normal costing system in which factory overhead is applied on the basis of direct labor costs. Budgeted factory overhead for the year was $680,000, and management budgeted $343,000 of direct labor costs. During the year, the company incurred the following actual costs.
| Direct materials used | $385,000 | ||
| Direct labor | 306,000 | ||
| Factory overhead | 653,500 | ||
The January 1 balances of inventory accounts are shown below.
| Materials — all direct | $61,900 | ||
| Work-in-process | 40,500 | ||
| Finished goods | 26,800 | ||
The December 31 balances of these inventory accounts were ten percent lower than the balances at the beginning of the year.
The amount of direct materials purchased during the year is:
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