Concord, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The standard cost card for the shirts is as follows. Standard Price Standard Quantity Standard Cost Direct materials $3 per yard 2.00 yards $6.00 Direct labor $14 per DLH 0.75 DLH 10.50 Variable overhead $3.20 per DLH 0.75 DLH 2.40 Fixed overhead $3 per DLH 0.75 DLH 2.25 $21.15 Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November. The company purchased 82,100 yards of fabric and used 93,700 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran $460,600, with an actual hourly rate of $12.25 per direct labor hour. The annual budgets were based on the production of 601,000 shirts, using 451,000 direct labor hours. Though the budget for November was based on 45,600 shirts, the company actually produced 42,100 shirts during the month. Variable Overhead Budget Annual Budget Per Shirt November—Actual Indirect material $454,000 $1.20 $49,300 Indirect labor 295,000 0.75 31,400 Equipment repair 201,000 0.30 20,100 Equipment power 49,500 0.15 7,100 Total $999,500 $2.40 $107,900 Fixed Overhead Budget Annual Budget November—Actual Supervisory salaries $265,000 $21,500 Insurance 348,000 27,600 Property taxes 85,000 6,900 Depreciation 325,000 26,000 Utilities 210,000 20,200 Quality inspection 276,000 24,600 Total $1,509,000 $126,800 (a) Calculate the direct materials price and quantity variances for November. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
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.
Concord, Ltd. manufactures shirts, which it sells to customers for embroidering with various slogans and emblems. The
| Standard Price | Standard Quantity | Standard Cost | ||||||
|---|---|---|---|---|---|---|---|---|
|
Direct materials
|
$3 per yard | 2.00 | yards | $6.00 | ||||
|
Direct labor
|
$14 per DLH | 0.75 | DLH | 10.50 | ||||
|
Variable overhead
|
$3.20 per DLH | 0.75 | DLH | 2.40 | ||||
|
Fixed overhead
|
$3 per DLH | 0.75 | DLH | 2.25 | ||||
| $21.15 |
Sandy Robison, operations manager, was reviewing the results for November when he became upset by the unfavorable variances he was seeing. In an attempt to understand what had happened, Sandy asked CFO Suzy Summers for more information. She provided the following overhead budgets, along with the actual results for November.
The company purchased 82,100 yards of fabric and used 93,700 yards of fabric during the month. Fabric purchases during the month were made at $2.80 per yard. The direct labor payroll ran $460,600, with an actual hourly rate of $12.25 per direct labor hour. The annual budgets were based on the production of 601,000 shirts, using 451,000 direct labor hours. Though the budget for November was based on 45,600 shirts, the company actually produced 42,100 shirts during the month.
|
Variable Overhead Budget
|
|||||||
|---|---|---|---|---|---|---|---|
|
Annual Budget
|
Per Shirt
|
November—Actual
|
|||||
|
Indirect material
|
$454,000 | $1.20 | $49,300 | ||||
|
Indirect labor
|
295,000 | 0.75 | 31,400 | ||||
|
Equipment repair
|
201,000 | 0.30 | 20,100 | ||||
|
Equipment power
|
49,500 | 0.15 | 7,100 | ||||
|
Total
|
$999,500 | $2.40 | $107,900 |
|
Fixed Overhead Budget
|
|||||
|---|---|---|---|---|---|
|
Annual Budget
|
November—Actual
|
||||
|
Supervisory salaries
|
$265,000 | $21,500 | |||
|
Insurance
|
348,000 | 27,600 | |||
|
Property taxes
|
85,000 | 6,900 | |||
|
|
325,000 | 26,000 | |||
|
Utilities
|
210,000 | 20,200 | |||
|
Quality inspection
|
276,000 | 24,600 | |||
|
Total
|
$1,509,000 | $126,800 |
(a) Calculate the direct materials price and quantity variances for November. (If variance is zero, select "Not Applicable" and enter 0 for the amounts.)
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