Standard Job Order Costing $-$

Variance Analysis

Special order lamps are manufactured in division S$.$ Because of the precise nature of the process a

standard cost system has been developed. The following standards are used for the special orders:

Standards

Lamp Kits $$16\mathrm{.}000000$ per lamp

Direct Labor $2\mathrm{.}400000$ per lamp $(4$ lamps$/$hr$.)$

Variable Overhead $0\mathrm{.}250000$ per lamp $(4$ lamps$/$hr$.)$

$**$ Fixed Overhead $10\mathrm{.}000000$ per lamp

Total $$28\mathrm{.}650000$

$**$ Fixed overhead is based on expected production of $4,005$ customized lamps each month.

To keep records of the actual cost of a job, a Job Order Cost System has been developed. Entries

are made to the Job Order System at actual cost $($overhead is applied based on actual labor hours$)$

while entries are made to the accounting system at standard. Variance analysis is used to analyze the

differences.

Job Order Costing Section

On January $1,20$x$2,$ Division S began Job $1101$ for the Client, THE BIG CHILDREN STORE. The

job called for $4,000$ customized lamps. The following set of transactions occurred from

January $5$ until the job was completed:

$5-$Jan Purchased $4,200$ Lamp Kits @ $$16\mathrm{.}45$ per kit.

$9-$Jan $4,150$ sets of Lamp Kits were requisitioned.

$17-$Jan Payroll of $590$ Direct Labor Hours @ $$9\mathrm{.}45$ per hour.

$30-$Jan Payroll of $640$ Direct Labor Hours @ $$9\mathrm{.}70$ per hour.

$30-$Jan $3,995$ lamps were completed and shipped. All materials requisitioned were

used or scrapped.

Month End Overhead Information

Actual Variable Overhead $$1,205\mathrm{.}40$

Actual Fixed Overhead $$40,123\mathrm{.}45$