Calculate the deficiency in labour hours for the month.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Question 1: Relevant costs and CVP
Cove Ltd is a company that makes three products and the variable costs are as follows;
A B C
£ £ £
Direct materials 12 13 15
Direct labour (£12 per hour) 24 36 36
Variable overhead 1 2 2
37 51 53
The sale price of A is £42, B is £57 and C is £56. During the month of June the availability of Direct Labour is limited to 12,000 hours due to staff taking holidays. Sales demand is expected to be 3000 units of A, 3000 units of B and 2000 of C.
Monthly fixed costs are £20,000 and opening stocks are zero.
Required:
- Calculate the deficiency in labour hours for the month.
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