S_Session 05 - Product Costing - Post Class.pdf

Assume that the variances are closed to cogs actual

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(Assume that the variances are closed to COGS.) Actual: $16,500 + $6,750 + $0 + $0 = $23,250 Normal: $16,500 + $13,500 + $0 - $8,100 = $21,900 Standard: $10,000 + $9,000 + $7,800 - $2,700 = $24,100.
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Compared to closing to COGS, what if over-applied variances are prorated instead?
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35 4a. Prorate the variances to COGS and Ending Inventory Actual Normal Standard Cost of Goods Sold (1,000 units) Direct Labor No Variance No Variance 7,800 x 10,000 = 12,000 6,500 Manufacturing Overhead No Variance (8,100) x 13,500 = 16,200 (6,750) (2,700) x 9,000 = 10,800 (2,250) Cost of Ending Inventory (200 units) Direct Labor No Variance No Variance 7,800 x 2,000 = 12,000 1,300 Manufacturing Overhead No Variance (8,100) x 2,700 = 16,200 (1,350) (2,700) x 1,800 = 10,800 (450)
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36 4b. Compute the Cost of Goods Sold Actual: $16,500 + $6,750 + $0 + $0 = $23,250 Normal: $16,500 + $13,500 + $0 - $6,750 = $23,250 Standard: $10,000 + $9,000 + $6,500 - $2,250 = $23,250
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