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. HB Corporation ir

. HB Corporation ir

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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II. HB Corporation in Delaware, U.S., makes and sells a single product. The company operates a standard costing system and a just-in-time purchasing and production system. No inventory of raw materials or finished goods is held. Details of the budget and actual data for the previous period are given below: Budget data Standard production costs per unit (currency in U.S. dollar, $): 8kg @$10.80 per kg 1.25 hours @$18.00 per hour 1.25 hours @$6.00 per direct labor hour Direct material 86.40 Direct labor 22.50 Variable overheads 7.50 Standard selling price: $180 per unit Budgeted fixed production overheads: $170 000 Budgeted production and sales: 10 000 units Actual data Direct material: 74 000kg @$11.20 per kg Direct labor: 10,800 hours @$19.00 per hour Variable overheads: $70,000 Actual selling price: $184 per unit Actual fixed production overheads: $168 000 Actual production and sales: 9000 units Requirements 1. Calculate the variances that would be different and any additional variances that would be required if the reconciliation statement was prepared using standard absorption costing. 2. Explain the arguments for the use of traditional absorption costing rather than marginal costing for profit reporting and inventory valuation.
Transcribed Image Text:II. HB Corporation in Delaware, U.S., makes and sells a single product. The company operates a standard costing system and a just-in-time purchasing and production system. No inventory of raw materials or finished goods is held. Details of the budget and actual data for the previous period are given below: Budget data Standard production costs per unit (currency in U.S. dollar, $): 8kg @$10.80 per kg 1.25 hours @$18.00 per hour 1.25 hours @$6.00 per direct labor hour Direct material 86.40 Direct labor 22.50 Variable overheads 7.50 Standard selling price: $180 per unit Budgeted fixed production overheads: $170 000 Budgeted production and sales: 10 000 units Actual data Direct material: 74 000kg @$11.20 per kg Direct labor: 10,800 hours @$19.00 per hour Variable overheads: $70,000 Actual selling price: $184 per unit Actual fixed production overheads: $168 000 Actual production and sales: 9000 units Requirements 1. Calculate the variances that would be different and any additional variances that would be required if the reconciliation statement was prepared using standard absorption costing. 2. Explain the arguments for the use of traditional absorption costing rather than marginal costing for profit reporting and inventory valuation.
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