Exercise 6-14 Silva Plastics Company has established standard cost for a unit of manufactured product as follows: Materials (3 kgs. @ P9) Labor (1 hour @ P84) Variable overhead (1 hour @ P24) Fixed overhead (1 hour @ P36) P27.00 84.00 24.00 36.00 Total standard unit cost P171.00 At normal operating capacity, 100,000 units of product should be manufactured in a year. Costs data pertaining to the operations for the year are summarized below: P1,908,000 Materials purchased (200,000 kgs.) Materials used in production 185,000 kgs. Labor hours Labor rate P90.00 per hour P1,380,000 Factory overhead- Variable P3,600,000 Fixed During the year, 60,000 units of product were put into production and were completed. There were no units in process at the beginning or at the end of the year. There are also no inventories of raw materials or finished goods at the beginning of the year. 1. Determine the materials and labor variances graphically and by formula. 2. Prepare the flexible overhead budget using the format of page 217. 3. Determine the overhead variances using the 2-way method. REQUIRED:
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.
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