Question ABC Company has established standard costs for the furniture department, in which one (1) size of the cabinet is made. The standard costs of producing one (1) of these cabinets are shown below: Direct material (Lumber) 50 board feet at P4.00 per foot P200.00 Labor standard 8 hours at P10.00 per hour 80.00 Variable overhead 8 hours at P5.00 per hour 40.00 Fixed overhead 8 hours at P3.00 per hour 24.00 Total P344.00 During January 201A, 500 cabinets were produced. The actual cost of operations during the month are shown below: Direct materials purchased (30,000 board feet at P4.10 per board foot) P123,000 Direct materials used (24,000 board feet) Direct labor (4,200 hours at P9.50 per hour) 39,900 Total variable overhead cost 22,000 Total fixed overhead cost 11,000 The budgeted overhead for the furniture department based on a normal monthly activity of 4,500 hours is P36,000, of which P22,500 is variable and P13,500 is fixed overhead. Requirements 1. Material purchase price variance (MPPV) & Material usage/quantity variance (MQV) 2. Labor rate variance (LRV) & Labor efficiency variance (LEV) 3. Variable overhead (VOH) rate variance & VOH efficiency variance 4. Fixed overhead (FOH) spending variance & FOH volume 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.
ABC Company has established
Direct material (Lumber)
50 board feet at P4.00 per foot P200.00
Labor standard
8 hours at P10.00 per hour 80.00
Variable overhead
8 hours at P5.00 per hour 40.00
Fixed overhead
8 hours at P3.00 per hour 24.00
Total P344.00
During January 201A, 500 cabinets were produced. The actual cost of operations during the month are shown below:
Direct materials purchased (30,000 board feet at P4.10 per board foot)
P123,000
Direct materials used (24,000 board feet)
Direct labor (4,200 hours at P9.50 per hour) 39,900
Total variable overhead cost 22,000
Total fixed overhead cost 11,000
The budgeted overhead for the furniture department based on a normal monthly activity of 4,500 hours is P36,000, of which P22,500 is variable and P13,500 is fixed overhead.
Requirements
1. Material purchase price variance (MPPV) & Material usage/quantity variance (MQV)
2. Labor rate variance (LRV) & Labor efficiency variance (LEV)
3. Variable overhead (VOH) rate variance & VOH efficiency variance
4. Fixed overhead (FOH) spending variance & FOH volume variance
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