Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 28

As an extension of 15-26, assume that at the end of the year, management of Patel and Sons, Inc., decides that the overhead variances should be allocated to WIP Inventory, Finished Goods Inventory, and CGS using the following percentages: 10 percent, 20 percent, and 70 percent, respectively. Provide the proper journal entry to close out the manufacturing overhead variances for the year.

Step 1 of 2

Cost Variance and Capacity Management:

Cost variance (CV), otherwise called spending fluctuation, is the distinction between the real expense and the planned expense, or what you expected to spend versus what you really spent.

Capacity management refers to the demonstration of guaranteeing a business amplifies its possible exercises and creation yield—consistently, under all conditions. The limit of a business quantifies how much organizations can accomplish, produce, or sell inside a given time-span.