Alibaba Manufacturing manufactures widgets for distribution. The standard costs for the manufacture of widgets follow: Standard Costs Actual Costs Direct materials 3 lbs. per widget at 31,000 lbs. at $34 $35 per pound per pound Direct labor 2.5 hours per widget 22,500 hours at at $11 per hour $11.80 per hour Factory overhead Variable cost, $24/widget $241,500 variable cost Fixed cost, $40/widget $381,250 fixed cost Budgeted factory overhead was $640,000. Overhead applied is based on widgets produced. The company estimated that 10,000 widgets would be produced; however, only 9,600 were produced. Instructions Calculate the following amounts. 1. Rate at which total factory overhead is applied 2. Materials price variance 3. Total materials variance 4. Overhead volume variance 5. Overhead controllable variance
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.
Alibaba Manufacturing manufactures widgets for distribution. The
Standard Costs Actual Costs
Direct materials 3 lbs. per widget at 31,000 lbs. at $34
$35 per pound per pound
Direct labor 2.5 hours per widget 22,500 hours at
at $11 per hour $11.80 per hour
Factory
Fixed cost, $40/widget $381,250 fixed cost
Budgeted factory overhead was $640,000. Overhead applied is based on widgets produced. The company estimated that 10,000 widgets would be produced; however, only 9,600 were produced.
Instructions
Calculate the following amounts.
1. Rate at which total factory overhead is applied
2. Materials price variance
3. Total materials variance
4. Overhead volume variance
5. Overhead controllable variance
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