Use the following information for exercise: Cinturon Corporation produces high-quality leather belts. The company's plant in Newcastle uses a standard costing system and has set the following standards for materials and labour: Leather (3 strips @ $4) $12.00 Direct labour (0.75 hr @ $18 13.50 Total prime cost $25.50 During the first month of the year, the Newcastle plant produced 92 000 belts. Actual leather purchased was 287 500 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labour was 78 200 hours at $18.50 per hour. BUDGET VARIANCES, MATERIALS AND LABOUR Refer to the information for Cinturon Corporation above. REQUIRED: 1 Compute the costs of leather and direct labour that should be incurred for the production of 92 000 leather belts. 2 Compute the total budget variances for materials and labour. 3 Would you consider these variances material with a need for investigation? Explain.
Use the following information for exercise: Cinturon Corporation produces high-quality leather belts. The company's plant in Newcastle uses a standard costing system and has set the following standards for materials and labour: Leather (3 strips @ $4) $12.00 Direct labour (0.75 hr @ $18 13.50 Total prime cost $25.50 During the first month of the year, the Newcastle plant produced 92 000 belts. Actual leather purchased was 287 500 strips at $3.60 per strip. There were no beginning or ending inventories of leather. Actual direct labour was 78 200 hours at $18.50 per hour. BUDGET VARIANCES, MATERIALS AND LABOUR Refer to the information for Cinturon Corporation above. REQUIRED: 1 Compute the costs of leather and direct labour that should be incurred for the production of 92 000 leather belts. 2 Compute the total budget variances for materials and labour. 3 Would you consider these variances material with a need for investigation? Explain.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter9: Standard Costing: A Functional-based Control Approach
Section: Chapter Questions
Problem 28P: Haversham Corporation produces dress shirts. The company uses a standard costing system and has set...
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Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Use the following information for exercise:
Cinturon Corporation produces high-quality leather belts. The company's plant
in Newcastle uses a standard costing system and has set the following
standards for materials and labour:
Leather (3 strips @ $4)
$12.00
Direct labour (0.75 hr @ $18
13.50
Total prime cost
$25.50
During the first month of the year, the Newcastle plant produced 92 000 belts.
Actual leather purchased was 287 500 strips at $3.60 per strip. There were no
beginning or ending inventories of leather. Actual direct labour was 78 200
hours at $18.50 per hour.
BUDGET VARIANCES , MATERIALS AND LABOUR
Refer to the information for Cinturon Corporation above.
REQUIRED:
1 Compute the costs of leather and direct labour that should be incurred
for the production of 92 000 leather belts.
2 Compute the total budget variances for materials and labour.
3 Would you consider these variances material with a need for
investigation? Explain.
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