Jackson Corporation Uses a Standard Cost System, Applying Manufacturing Overhead

question 48

Essay

Jackson Corporation uses a standard cost system, applying manufacturing overhead on the basis of machine hours. The company's overhead standards per unit are shown below.
Variable overhead: 4 hours at $9 per hour
Fixed overhead: 4 hours at $6* per hour
*Based on planned monthly activity of 120,000 machine hours
Actual data for May were:
Number of units produced: 29,000
Number of machine hours worked: 125,000
Variable overhead costs incurred: $1,085,000
Fixed overhead costs incurred: $755,000
Required:
A. Calculate the spending and efficiency variances for variable overhead.
B. Calculate the budget and volume variances for fixed overhead.

Appreciate the nuances of inventory systems and their effect on the financial position statement.

Classify companies as merchandising entities versus other business types based on their primary source of revenue.

Understand the terminology and principles of accounting inventory systems.

Calculate discounts and determine the cost of inventory considering the payment terms.

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Definitions:

Bonds

Debt instruments that larger companies sell to raise long-term funds.

Preferred Stock

A special type of stock whose owners, though not generally having a say in running the company, have a claim to profits before other stockholders do.

Capital Lease

A lease agreement that grants a lessee the benefits and risks of ownership of the asset, typically recognized on the balance sheet.