f a company that uses "activity based costing" has three jobs--two jobs are not sold, but one is--how do you adjust the COGS for the month? I have all of the amounts of applied MOH and the actual MOH, but how do I calculate the variance to adjust the COGS expense. (The amount has been deemed immaterial)
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.
If a company that uses "activity based costing" has three jobs--two jobs are not sold, but one is--how do you adjust the COGS for the month? I have all of the amounts of applied MOH and the actual MOH, but how do I calculate the variance to adjust the COGS expense. (The amount has been deemed immaterial)
Activity Based Costing
Using the activity-based costing (ABC) method, overhead and indirect expenses are allocated to linked goods and services. In contrast to conventional costing techniques, this accounting method of costing acknowledges the connection between costs, overhead activities, and manufactured goods, allocating indirect costs to products less randomly. However, some indirect expenditures, such the salary of the management and office personnel, are challenging to relate to a specific product. Since activity-based costing (ABC) improves the dependability of cost data, it produces virtually true costs and more accurately categorizes the costs spent by the company during its production process. ABC is mostly utilized in the manufacturing industry.
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