Answered: Jackson Industries uses a standard cost…

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter8: Standard Cost Accounting—materials, Labor, And Factory Overhead

Section: Chapter Questions

Problem 5P: High-End Products Inc. uses a standard cost system in accounting for the cost of production of its...

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Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson uses the following standards for one

unit of product.

	Standard Quantity	Standard Price or Rate
Direct Materials	5 pounds	$3.60 per pound
Direct Labor	1.25 Hours	$12.00 per Hour

In November 2021, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for November were $364,000 and worked 28,000 direct labor hours. The company manufactured 22,000 units of product during May using 108,000 pounds of direct materials.

Required:

A). Compute the cost that should be incurred for the production of 15,000 units.

B). Calculate the material price variance and the material usage variance and label them as either “favourable” or “unfavourable”.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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