Sm Ch 24

To estimate product costs, an analysis of the primary cost drivers for each step of the manufacturing process was performed. Table 1 details each activity, along with the corresponding base, total quantity, total cost, and activity rate:

In examining the variance for the product costs, the results are unfavorable. The total for direct materials are were more than 7,750 more than originally estimated. We originally factored in a cost of $232,500 for the cost of of the products. Instead we spent $240,250. It is important for us to have the number accurate. This could be due to a cost increase in raw materials, additional transportation costs, not purchasing in bulk, and not paying invoices within the interest free period. The direct material price variance is neither favorable or unfavorable because the cost of the product is the same. The direct quantiy variance is also unfavorableThe direct material quantity has a variance which could be caused by items being

In production, there are different types involved before a product brings revenue to the company. The costs involved incurred by Spyglass Inc. for the Batch 27A’s order of 500,000 units are:

The planned volume was 150,000 units and the actual units produced was 160,000. Since the units produced was higher than what was expected, the volume decreased the fixed cost per unit and the volume variance is

Super Bakery is a distinguished company created in 1990. The company has is a supplier of mineral, vitamin, and protein enriched doughnuts. The strategy applied by the company is job order cost method. Job costing is a product costing system when costs are accumulated by specific job orders and assigned to batches of products. In other words, manufacturing costs are assigned to specific job, specific customers, specific orders, specific projects, and specific contracts. Job costing is preferable to small and medium-sized companies, such as professional services (e.g. medical, legal), advertising

In 2003 the actual sales revenue is less than the budgeted sales revenue by 3%. The reason for this is falling sales volume and not falling selling price. This is because quantity variance component of sales revenue flexible budget is higher than price variance component of sales revenue flexible budget. Moreover, cost of production variance is almost 7%. This is attributed to high variances of leather costs, finishing cost and manufacturing overheads. Both variable and fixed manufacturing overheads have a variance of 6%. In case of leather, output variance is higher than price variance. This indicates that BBC has not used leather properly and there was wastage and inefficiency. Furthermore, finishing cost variance is as high as 5%. In this case, price variance (wage-rate variance) is positive (i.e. actual input price more than forecast) and output variance (efficiency variance) is negative (i.e. actual input quantity used per unit of output is less than standard i.e. efficiency improves). That is, finishing costs are rising due to external factors i.e. rising input prices despite improved efficiency.

One of the basic parts of cost accounting is to gauge the cost of tangible or intangible product or service. All costing models are attempting to discover the "correct" cost 1.e actual cost without any cost variances for all cost objects, for example, product, profit, segment, and division. costing methodologies all over the world apportion overhead by utilizing volume- driven measure, for example, unit transformed to first gauge a foreordained overhead rate then assign overhead by applying this normal overhead rate to the cost object. Requisition of such models is authentic for offices generating goods with less differing qualities. In any case, as manufactured goods differ, the wide averaging methodology prompts severe cost variations

CI uses standard unit costs to measure performance and profit potential. In this cost system, each materials and labor input is given a standard usage, and production managers are evaluated on their ability to meet or improve upon these standards. Differences from the standard were called “variances.” For example, if a certain manufacturing operation required at standard 5 minutes, the operator would be expected to complete a lot of 100 parts in 500 minutes. If actually 550 minutes were required, there would be a 50 minute unfavorable variance. Also, using the operator’s wage rate, the cost of the variance could be calculated.

Manufacturing costing methods are accounting techniques that are used to help understand the value of inputs and outputs in the production process. By tracking and categorizing the information according to a rigorous accounting system, corporate management can determine with a high degree of accuracy, the cost per unit production and other key performance indicators. Management needs this information in order to make informed decisions about the production levels, pricing, competitive strategy ,future investments and a host of other concerns .

AC505 - Capital Budgeting Problem Data: Cost of new equipment Expected life of equipment in years Disposal value in 5 years Life production - number of cans Annual production or purchase needs Initial training costs Number of workers needed Annual hours to be worked per employee Earnings per hour for employees Annual health benefits per employee Other annual benefits per employee-% of wages Cost of raw materials per can Other variable production costs per can Costs to purchase cans - per can Required rate of return Tax rate Make Cost to produce Annual cost of direct material: Need of 1,000,000 cans per year Annual cost of direct labor for new employees: Wages Health benefits Other benefits Total wages and benefits Total annual production

Hence we can Estimated Indirect (overhead) cost per unit is quite different for each product, unlike the traditional costing where indirect costs per unit were the same for all four products. This approach recognizes that product W uses more activity pool resources than product X , product Y and product Z .

Management needs to determine which costs can be controlled and which costs cannot be controlled. The variance analysis simply showed that there was an unfavorable variance for manufacturing (99,000 U). Manufacturing Cost of Goods Sold must be evaluated individually because of the underlying facets from just a number. This unfavorable number could be caused by either an increase in price or a waste in using the number of unit materials. The materials variance should be broken down into the price variance and the usage variance. Exhibit 1 shows that variable cost and fixed cost were separated and variance was computed. Variable cost was the main culprit of the increase in cost. Here, we can identify that the increase may

Under the new cost system, two broad sources of costs were identified: manufacturing and SM&A. All costs within these categories were reclassified as either volume driven or order driven. Hence, four cost pools were set up.

Standard cost is defined as, an estimated or predetermined cost of performing an operation so as to produce goods and services, under normal conditions. It is used as the target cost, which helps to compare to actual costs that are unpredictable. Usually, these costs are developed from previous performances of the company through a historical data analysis or the current trends that the company is registering. Standard cost estimates are the starting point for determining the company’s budget. Standard costs are associated with a company 's costs of direct materials, direct labor, and overhead. Instead of assigning the actual costs to a product, companies tend to assign an expected or standard cost to the product. Therefore when goods are sold, the amount will reflect the standard cost not the actual product cost. It also serves as a measure of efficiency of the production process, since, when compared to the actual cost, identifies the points where inefficiencies or misappropriation of resources may occur. The standard cost is pre-assigned, taken as the basis for recording the production before the determination of cost effective. In his managerial design, standard cost indicates the optimal cost, i.e., one that should be achieved by the industry in terms of full efficiency and maximum performance.

Traditional standard costing (TSC), used in cost accounting, dates back to the 1920s and is a central method in management accounting practiced today because it is used for financial statement reporting for the valuation of income statement and balance sheet line items such as cost of goods sold (COGS) and inventory valuation. Traditional standard costing must comply with generally accepted accounting principles (GAAP US) and actually aligns itself more with answering financial accounting requirements rather than providing solutions for management accountants. Traditional approaches limit themselves by defining cost behavior only in terms of production or sales