Fall Industries has set the following standards for one unit: Direct material Quantity: 45 yards Price per yard: $2.70 per yard Direct labor Quantity: 9 hours per unit Rate per hour: $16 per hour Actual costs incurred in the production of 1,200 units were as follows: Direct material: $99,000 ($2.75 per yard) Direct labor: $129,560 ($15.80 per hour) All materials purchased were consumed during the period. Required: 1. Calculate the direct-material price and quantity variances. Indicate whether each variance is favorable or unfavorable. 2. Calculate the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable. 3. Write a memo to your manager with the results of your findings. a. What do each of the variances mean (describe what each variance measures)? b. How is Fall performing based on each of these variances? c. What variances suggest improvement is needed, and how can the company improve that specific variance (give two specific ways per variance that needs improvement)?
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.
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