Don Johnson is the management accountant for Cari-Blocks (CB), which manufactures specialty blocks. CB uses two direct cost categories: direct materials and direct manufacturing labour. Johnson feels that manufacturing overhead is most closely related to material usage. Therefore, CB allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2021, CB budgeted annual production of 200,000 blocks and adopted the following standards for each block: Input Cost/Block Direct materials 0.5 lb. @ $12/lb. $ 6.00 Direct manufacturing labour 1.4 hours @ $20/hour 28.00 Manufacturing overhead: Variable $6/lb. 0.5 lb. 3.00 Fixed $15/lb. 0.3 lb. 4.50 Standard cost per block $41.50 Actual results for April 2021 were as follows: Production 24,000 blocks Direct materials purchased 12,000 lb. at $13/lb. Direct materials used 11,450 lb. Direct manufacturing labour 38,000 hours for $798000 Variable manufacturing overhead $68,150 Fixed manufacturing overhead $155,000 Required: 1) Prepare a schedule of total standard manufacturing costs for the 24000 production of blocks in April 2021. 2) For the month of April, compute the following variances, indicating whether each is favourable (F) or unfavourable (U): a. Direct materials price variance (based on purchases) b. Direct materials efficiency variance c. Direct manufacturing labour price variance
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.
Don Johnson is the
At the beginning of 2021, CB budgeted annual production of 200,000 blocks and adopted the following standards for each block:
Input Cost/Block
Direct materials 0.5 lb. @ $12/lb. $ 6.00
Direct manufacturing labour 1.4 hours @ $20/hour 28.00
Manufacturing overhead:
Variable $6/lb. 0.5 lb. 3.00
Fixed $15/lb. 0.3 lb. 4.50
Actual results for April 2021 were as follows:
Production 24,000 blocks
Direct materials purchased 12,000 lb. at $13/lb.
Direct materials used 11,450 lb.
Direct manufacturing labour 38,000 hours for $798000
Variable manufacturing overhead $68,150
Fixed manufacturing overhead $155,000 Required:
1) Prepare a schedule of total standard
2) For the month of April, compute the following variances, indicating whether each is favourable (F) or unfavourable (U):
a. Direct materials price variance (based on purchases)
b. Direct materials efficiency variance
c. Direct manufacturing labour price variance
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