Activity-Based Costing Quality Cuts Inc. has total estimated factory overhead for the year of $204,000, divided into four activities: cutting, $81,000; sewing, $25,500; setup, $60,000; and inspection, $37,500. Quality Cuts manufactures two types of men’s pants: jeans and khakis. The activity-base usage quantities for each product by each activity are as follows: Cutting Sewing Setup Inspection Jeans 500 dlh 1,000 dlh 250 setups 100 inspections Khakis 1,000 500 750 400 1,500 dlh 1,500 dlh 1,000 setups 500 inspections Each product is budgeted for 10,000 units of production for the year. a. Determine the activity rates for each activity. Cutting Sewing Setup Inspection b. Determine the factory overhead cost per unit for each product, using activity-based costing. Round your answers to two decimal places. Jeans $ Khakis $
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.
Activity-Based Costing
Quality Cuts Inc. has total estimated factory
| Cutting | Sewing | Setup | Inspection | |||||
| Jeans | 500 | dlh | 1,000 | dlh | 250 | setups | 100 | inspections |
| Khakis | 1,000 | 500 | 750 | 400 | ||||
| 1,500 | dlh | 1,500 | dlh | 1,000 | setups | 500 | inspections |
Each product is budgeted for 10,000 units of production for the year.
a. Determine the activity rates for each activity.
| Cutting | ||
| Sewing | ||
| Setup | ||
| Inspection |
b. Determine the
| Jeans | $ |
| Khakis | $ |
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