6. The budgeted overheads and cost driver volumes of XYZ are as follows. Cost pool Budgeted Overheads (RM) Material procurement 580,000 Material handling 250,000 Set- up 415,000 Maintenance 970,000 Quality control 176,000 Machinery 720,000 Cost driver Budgeted volume No of orders 1,100 No of movements 680 No of set ups 520 Maintenance hours 8400 No of inspection 900 No of machine hours 24,000 The company has produced a batch of 2,600 components of A.X-1S, its material cost was RM 130,000 and labour cost RM 245,000. The usage activities of the said batch are as follows. Material orders is 26. Maintenance hours is 690. Material movements is 18. Inspection is 28. Set ups is 25. Machine hours 1,800 Required (c) Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.
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.
6. The budgeted
|
Cost pool |
Budgeted Overheads (RM) |
|
Material procurement |
580,000 |
|
Material handling |
250,000 |
|
Set- up |
415,000 |
|
Maintenance |
970,000 |
|
Quality control |
176,000 |
|
Machinery |
720,000 |
|
Cost driver |
Budgeted volume |
|
No of orders |
1,100 |
|
No of movements |
680 |
|
No of set ups |
520 |
|
Maintenance hours |
8400 |
|
No of inspection |
900 |
|
No of machine hours |
24,000 |
The company has produced a batch of 2,600 components of A.X-1S, its material
cost was RM 130,000 and labour cost RM 245,000. The usage activities of the said batch are as follows. Material orders is 26. Maintenance hours is 690. Material movements is 18.
Inspection is 28. Set ups is 25. Machine hours 1,800
Required
(c) Explain how activity-based costing systems can provide more accurate
product costs than traditional cost systems.
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