Concept explainers
(a)
Concept Introduction:
To Prepare:
The manufacturing standard cost budget forMay for McAlister's Bottle company.
Answer to Problem 13.19E
The standard cost budget for May manufacturing is provided in detail which gives a total budgeted cost of
Explanation of Solution
Standard cost budget for May manufacturing is given below:
McAlister's Bottle Company | |||
Standard cost budget | |||
For the months ending in May | |||
Cost category | Standard cost per two-Liter bottle (A) | Budgeted Production (B) | Total Budgeted Cost(AxB)/ |
Direct Labor | | | |
Direct Material | | | |
Factory Overhead | | | |
Total | |
(b)
Concept Introduction:
Standard cost is an accounting system which is used by manufacturers to know the difference between actual cost and standard cost of product.
To Prepare:
A Budget performance report for
Answer to Problem 13.19E
A budget performance report for manufacturing costs, showing total cost variances for direct materials, direct labour and factory overhead for may is provided in detail.
Explanation of Solution
Comparison of flexible budget with actual expenditure is as follows:
McAlister's Bottle Company | |||
Standard cost budget | |||
For the months ending in May | |||
Cost category | Actual cost | Standard cost at actual volume ( Bottles) (Note 1) | Cost Variance(Favorable)/ Unfavorable |
Direct Labor | | | |
Direct Material | | | |
Factory Overhead | | | |
Total | | | |
Note 1 − Computation of standard cost at actual production:
Direct Labor:
Direct Material:
Factory overhead:
(c)
Concept Introduction:
Standard cost is an accounting system which is used by manufacturers to know the difference between actual cost and standard cost of product.
Interpret the budget performance report.
Answer to Problem 13.19E
A detailed budget performance report analsis is provided and discussed.
Explanation of Solution
At the actual volume the actual cost is more than standard cost for all the three components. The cost is over
To control direct labor cost skill workers should be appointed for the manufacturing process and proper training should be given to reduce the direct labor cost. The working environment should be good to reduce the turnover cost.
To control direct material cost, management should ensure the quality of the material and ration of input and output should be proper and waste should not be more than tolerance level.
To control factory overhead method used by management should be as per plan.
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Chapter 13 Solutions
Survey of Accounting (Accounting I)
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