Fresh Company produces a well-known perfume. The standard manufacturing cost of the perfume is described by the following standard cost sheet: Direct materials: Liquids (5 oz. @ $ 0.25) $1.25 Bottles (1 @ RM 0.05) $ 0.05 Direct Labor (0.25 @ $13.00) $ 3.25 Variable overhead (0.25 @ $ 5) $1.25 Fixed overhead (0.25 @ $10.00) $ 2.50 Standard cost per unit $ 8.30 Management has decided to investigate only those variances that exceed the lesser of 10% of the standard cost for each category or $22,000. During the past quarter, a total of 300,000 four-ounce bottles of perfume was produced. Descriptions of actual activity for the quarter follow: a. A total of 1.2 million ounces of liquids was purchased, mixed, and processed. The price paid per ounce averaged $0.27 b. Exactly 280,000 bottles were used. The price paid for each bottle was $ 0.055. c. Direct labor hours totaled 50,000 with a total cost of $ 650,000 d. Variable overhead cost totaled $ 242,000 e. Fixed overhead cost was $ 600,000 Normal production volume for Fresh is 280,000 bottles per quarter. The standard overhead rates are computed using normal volume. Required -Please answer the sub part 1. Compute price and usage variances for materials. 2. Compute the labor rate and labor efficiency variances. 3. Compute the fixed overhead spending and volume variance. 4. Compute the variable overhead spending and efficiency variances.
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.
Fresh Company produces a well-known perfume. The standard
perfume is described by the following standard cost sheet:
Direct materials:
Liquids (5 oz. @ $ 0.25) $1.25
Bottles (1 @ RM 0.05) $ 0.05
Direct Labor (0.25 @ $13.00) $ 3.25
Variable
Fixed overhead (0.25 @ $10.00) $ 2.50
Standard cost per unit $ 8.30
Management has decided to investigate only those variances that exceed the lesser of 10% of
the standard cost for each category or $22,000. During the past quarter, a total of 300,000
four-ounce bottles of perfume was produced. Descriptions of actual activity for the quarter follow:
a. A total of 1.2 million ounces of liquids was purchased, mixed, and processed. The price
paid per ounce averaged $0.27
b. Exactly 280,000 bottles were used. The price paid for each bottle was $ 0.055.
c. Direct labor hours totaled 50,000 with a total cost of $ 650,000
d. Variable overhead cost totaled $ 242,000
e. Fixed overhead cost was $ 600,000
Normal production volume for Fresh is 280,000 bottles per quarter. The standard overhead rates
are computed using normal volume.
Required -Please answer the sub part
1. Compute price and usage variances for materials.
2. Compute the labor rate and labor efficiency variances.
3. Compute the fixed overhead spending and volume variance.
4. Compute the variable overhead spending and efficiency variances.
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