Good Toys Company produces a toy product. Data concerning the company’s operations last year appear below: Units in beginning inventory 0 Units produced 15,000 Units sold 12,000 Selling price per unit $110 Variable cost per unit: Direct materials $30 Direct labour $20 Variable manufacturing overhead $10 Variable selling and administrative costs $8 Fixed costs in total: Fixed manufacturing overhead $225,000 Fixed selling and administrative costs $280,000 Required (show your calculations): Prepare a variable costing income statement for the year.
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 2:
ABSORPTION AND VARIABLE COSTING AND BUDGETING (
- Good Toys Company produces a toy product. Data concerning the company’s operations last year appear below:
|
Units in beginning inventory |
0 |
|
Units produced |
15,000 |
|
Units sold |
12,000 |
|
Selling price per unit |
$110 |
|
Variable cost per unit: |
|
|
Direct materials |
$30 |
|
Direct labour |
$20 |
|
Variable manufacturing overhead |
$10 |
|
Variable selling and administrative costs |
$8 |
|
Fixed costs in total: |
|
|
Fixed manufacturing overhead |
$225,000 |
|
Fixed selling and administrative costs |
$280,000 |
Required (show your calculations):
Prepare a variable costing income statement for the year.
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Type in answers to Question 2. a. (expand the space as needed)
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- Client Solutions is working on its direct labour budget for August and September. The production budget calls for producing 4,000 units in August and 2,800 units in September. Each unit of output requires 0.9 direct labour-hours. The direct labour rate is $25.00 per direct labour hour in August. However, due to an unforeseen economic situation, the direct labour rate increased to $30.00 per direct labour hour in September. The company is committed to paying its direct labour force at least 3,000 hours in total each month even if there is not enough work to keep them busy. The company pays 1.5 times of normal rate for every hour worked over 3,000 hours in a month.
Required:
i) Construct the direct labour budget (in dollars) for August and September.
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Type in answers to Question 2. b. i. (expand the space as needed)
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- ii) While preparing the direct labour budget, the company’s top management team usually imposes the maximum number of direct labour hour required per unit of output. However, some employees feel that this practice gives them undue stress as it does not reflect reality. These employees prefer that they set the maximum number of direct labour hours required per output unit. Do you support the top management team’s viewpoint or employees’ viewpoint? Explain your answer. [Maximum word limit: 125 words]
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Type in answers to Question 2. b. ii. (expand the space as needed)
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