5-19 Apply the Logic of an ABC cost hierarchy. Huey Parker produces mathematical and financial calculators. Data related to the two products are presented below: Annual production in unit Mathematical: $50,000 Financial: $100,000 Direct Materials Cost Mathematical: $180,000 Financial: $360,000 Direct Manufacturing Labour Cost Mathematical: $60,000 Financial: $150,000 Direct Manufacturing Labour Hours Mathematical: 5,000 Financial: 5,000 Machine Hours Mathematical: 35,000 Financial: 40,000 Number of production runs Mathematical: 50 Financial: 50 Inspection Hours Mathematical: 1000 Financial: 500 Both products pass through Department 1 and Department 2. The departments’ combined manufacturing overhead costs are: Cost Machining Total $450,000 Cost Set up Total $144,000 Cost Inspection Total $126,000 Required: Compute the manufacturing overhead cost for each product. Compute the manufacturing cost for each product.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
5-19 Apply the Logic of an ABC cost hierarchy.
Huey Parker produces mathematical and financial calculators. Data related to the two products are presented below:
Annual production in unit
Mathematical: $50,000
Financial: $100,000
Direct Materials Cost
Mathematical: $180,000
Financial: $360,000
Direct Manufacturing Labour Cost
Mathematical: $60,000
Financial: $150,000
Direct Manufacturing Labour Hours
Mathematical: 5,000
Financial: 5,000
Machine Hours
Mathematical: 35,000
Financial: 40,000
Number of production runs
Mathematical: 50
Financial: 50
Inspection Hours
Mathematical: 1000
Financial: 500
Both products pass through Department 1 and Department 2. The departments’ combined manufacturing overhead costs are:
Cost Machining Total $450,000
Cost Set up Total $144,000
Cost Inspection Total $126,000
Required:
- Compute the manufacturing overhead cost for each product.
- Compute the
manufacturing cost for each product.
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