Mercurial Company has made the following information available for its production facility for the current month. Fixed overhead was estimated at 22,000 machine hours for the production cycle. Actual machine hours for the period were 22,500; 4,200 units were produced. Material purchased (107,000 pieces) P529,650 Material quantity variance P7,000 U Machine hours used (22,500 hours) VOH spending variance P100 U Actual fixed overhead P81,000 Actual labor cost P60,300 Actual labor hours 8,500 Mercurial Company’s standard costs are as follows: Direct material 25 pieces @ P5 per piece Direct labor 2.0 hours @ P7 per hour Variable overhead (applied on a machine hour basis) 5.2 hours @ P3.00 per hour Fixed overhead (applied on a machine hour basis) 5.2 hours @ P3.50 per hour Determine the following items: j. standard machine hours allowed k. variable overhead efficiency variance l. budgeted fixed overhead
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.
Case:
Mercurial Company has made the following information available for its production facility for the current month. Fixed overhead was estimated at 22,000 machine hours for the production cycle. Actual machine hours for the period were 22,500; 4,200 units were produced.
Material purchased (107,000 pieces)
P529,650
Material quantity variance
P7,000
U
Machine hours used (22,500 hours)
VOH spending variance
P100
U
Actual fixed overhead
P81,000
Actual labor cost
P60,300
Actual labor hours
8,500
Mercurial Company’s
Direct material
25 pieces @ P5 per piece
Direct labor
2.0 hours @ P7 per hour
Variable overhead
(applied on a machine hour basis)
5.2 hours @ P3.00 per hour
Fixed overhead
(applied on a machine hour basis)
5.2 hours @ P3.50 per hour
Determine the following items:
j. standard machine hours allowed
k. variable overhead efficiency variance
l. budgeted fixed overhead
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