Calculate the variances in as much detail as possible and identify possible causes for the variances and recommend corrective actions for them.
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.
Claudia Limited makes a single product, X, using a single raw material P. Standard costs relating to X have been calculated as follows.
Per Unit (Rs)
Direct material, P, 100kg at Rs. 5 per kg 500
Direct labour, 10 hours at Rs.8 per hour 80
Variable production
Fixed production overhead, 10 hours at Rs.1 per hour 10
610
The standard selling price of a product X is Rs.900 and company aim to produce 1020 units a month.
During December, 1000 units of product X were produced and sold. Relevant details of this production are as follows.
90000 kgs costing Rs.720000 were bought and used.
8200 hours were worked during the month and total wages were Rs.63000.
The actual variable production overhead for the month was Rs. 25000.
The actual fixed production overhead for the month was Rs. 9800.
Each product X was for Rs. 975.
Calculate the variances in as much detail as possible and identify possible causes for the variances and recommend corrective actions for them.
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