Zee Corporation has developed the following cost standards for the production of its leather backpacks: Standard Cost Per Backpack Leather (0.9 yards × $22 per yard) $19.80 Direct labor (1.3 hours × $9.00 per hour) $11.70 Variable overhead (1.3 hours × $15.00 per hour) $19.50 Variable overhead at Zee is applied on the basis of direct labor hours. The actual results for last month were as follows: Number of backpacks produced 15,000 Direct labor hours incurred 18,800 Yards of leather purchased 14,500 Yards of leather used in production 14,100 Cost of leather purchased $306,675 Direct labor cost $159,800 Variable overhead cost $285,760 The direct materials purchases variance is computed when the materials are purchased. Required: Compute the following variances for Zee. Materials price variance. (favorable) Materials quantity variance. (unfavorable) Labor efficiency variance. (Favorable)
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.
Zee Corporation has developed the following
|
|
Standard Cost Per Backpack |
|
Leather (0.9 yards × $22 per yard) |
$19.80 |
|
Direct labor (1.3 hours × $9.00 per hour) |
$11.70 |
|
Variable overhead (1.3 hours × $15.00 per hour) |
$19.50 |
Variable overhead at Zee is applied on the basis of direct labor hours. The actual results for last month were as follows:
Number of backpacks produced 15,000
Direct labor hours incurred 18,800
Yards of leather purchased 14,500
Yards of leather used in production 14,100
Cost of leather purchased $306,675
Direct labor cost $159,800
Variable overhead cost $285,760
The direct materials purchases variance is computed when the materials are purchased.
Required:
Compute the following variances for Zee.
- Materials price variance. (favorable)
- Materials quantity variance. (unfavorable)
- Labor efficiency variance. (Favorable)
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