Luther, Inc. manufactures model airplane kits and projects production at 200, 450, 500, and 800 kits for the next four quarters. Direct materials are 7 ounces of plastic per kit and the plastic costs $5 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 860 ounces, and the company desires to end each quarter with 20% of the materials needed for the next quarter's production. Luther desires a balance of 230 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.25 hours of direct labor at an average cost of $20 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.25 per kit, and fixed overhead is $125 per quarter. Luther, Inc. Direct Materials Budget For the Year Ended December 31 First Second Third Fourth Quarter Quarter Quarter Quarter Total Budgeted kits to be produced 200 450 500 800 1950 Direct materials (ounces) per kit 7 7 7 7 Direct materials needed for production 1400 3150 3500 5600 13650 Plus: Desired direct materials in ending inventory 630 700 1120 230 230 Total direct materials needed 2030 3850 4620 5830 13880 Less: Direct materials in beginning inventory 860 630 700 1120 860 Budgeted purchases of direct materials 1170 3220 3920 4710 13020 Direct materials cost per ounce

Q: What is different than traditional costing that uses a volume-based driver? Can you give me some…

A: There are many different types of costing methods, out of which the selection of costing method to…

Q: At the beginning of the year, you estimated the following - Production - 75,000 units Raw Material -…

A: Standard price = Estimated Raw material cost / Estimated units Raw material efficiency variance =…

Q: What is the difference between whole units to be accounted for and whole units to be assigned costs?…

A: Difference between whole units to be accounted for and whole units to be assigned costs The whole…

Q: Which of the following statements is (are) true? (A) A price standard is the price that should be…

A: Standard costing refers to the method of costing used for the computation of expenses in the process…

Q: How do you compute the cost of goods manufactured?

A: Cost of goods manufactured is the total amount of expense incurred in order to convert work in…

Q: In your own words, explain the difference between absorption costing and variable costing methods.…

A: Absorption costing: Its also called as Full costing.

Q: Dengo Company makes a trail mix in two departments: Roasting and Blending. Direct materials are…

A: Direct materials refers to the tangible components that make up a product. Cost accounting uses the…

Q: Which one of the following are NOT period costs? a)  Advertising costs. b)  Indirect materials.…

A: Product cost are the costs that are directly or indirectly related to production. Direct Costs…

Q: Which of the following formulae is used to calculate the cost per equivalent unit of production…

A: Equivalent units of production = Fully and partially completed units expressed as , % of fully…

Q: Which of these costs would be the most difficult to estimate when you know exactly how many units…

A: When you know exactly how many units will be produced, the cost of materials used in the product…

Q: Calculate the total cost of production of the special clubs?

A: Concept. Overhead allocation is apportionment of indirect cost to produced goods . While doing…

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A: Hi! There are two questions given, but we are entitled to solve only one question at a time so I…

Q: What are some possible activity bases Cold Stone Creamery could use to allocate each cost?

A: Activity-based costing is method that is widely used in cost accounting that firstly identifies…

Q: ould the unit produ

A: RimsPostOverhead costActivity RateActivity LevelAllocated costActivity LevelAllocated costMachine…

Q: tatement is true or false, and correct the false tatement(s): Manufacturing cost is called period…

A: Manufacturing cost is the cost incurred to manufacture units . It includes direct material , direct…

Q: Do the engineering decisions account for the majority of product costs?

A: Yes, engineering decisions will account for the majority of the cost of the product. The main task…

Q: As we have discussed in previous chapters, product costs are made up of Direct Materials, Direct…

A: Cost behaviour analysis refers to management attempt to understand how operating cost change in…

Q: the manufactured overhea

A: Overhead represents the indirect expenses involved in the production process of the company.

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.