Helix Company produces costumes used in the television and movie industries. Recently the company received an ongoing order for Samurai robes to be worn in an upcoming Japanese historical action series made for television. The company uses a standard costing system to assist in the control of costs. According to the standards set for these robes, the factory has a denominator activity level of 780 direct labour-hours each month, which should result in the production of 1,950 robes. The standard costs associated with this level of production are as follows: Per Unit Direct materials Total $ 35,490 of Product $18.20 Direct labour $ 7,020 3.60 Variable manufacturing overhead* Fixed manufacturing overhead* $ 2,340 1.20 $ 4,680 2.40 $25.40 *Based on direct labour-hours During April, the factory worked only 760 direct labour-hours and produced 2,000 robes. The following actual costs were recorded during the month: Total Per Unit of Direct materials (6,000 metres) Direct labour $ 36,000 Product $18.00 $ 7,600 3.80 Variable manufacturing overhead Fixed manufacturing overhead $ 3,800 1.90 $ 4,600 2.30 $26.00 At standard, each robe should require 2.8 metres of material. All of the materials purchased during the month were used in production. Required: Compute the following variances for April:
Helix Company produces costumes used in the television and movie industries. Recently the company received an ongoing order for Samurai robes to be worn in an upcoming Japanese historical action series made for television. The company uses a standard costing system to assist in the control of costs. According to the standards set for these robes, the factory has a denominator activity level of 780 direct labour-hours each month, which should result in the production of 1,950 robes. The standard costs associated with this level of production are as follows: Per Unit Direct materials Total $ 35,490 of Product $18.20 Direct labour $ 7,020 3.60 Variable manufacturing overhead* Fixed manufacturing overhead* $ 2,340 1.20 $ 4,680 2.40 $25.40 *Based on direct labour-hours During April, the factory worked only 760 direct labour-hours and produced 2,000 robes. The following actual costs were recorded during the month: Total Per Unit of Direct materials (6,000 metres) Direct labour $ 36,000 Product $18.00 $ 7,600 3.80 Variable manufacturing overhead Fixed manufacturing overhead $ 3,800 1.90 $ 4,600 2.30 $26.00 At standard, each robe should require 2.8 metres of material. All of the materials purchased during the month were used in production. Required: Compute the following variances for April:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Concept explainers
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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Transcribed Image Text:Helix Company produces costumes used in the television and movie industries. Recently the company received an ongoing order for
Samurai robes to be worn in an upcoming Japanese historical action series made for television. The company uses a standard costing
system to assist in the control of costs. According to the standards set for these robes, the factory has a denominator activity level of
780 direct labour-hours each month, which should result in the production of 1,950 robes. The standard costs associated with this level
of production are as follows:
Per Unit
Direct materials
Total
$ 35,490
of
Product
$18.20
Direct labour
$
7,020
3.60
Variable manufacturing overhead*
Fixed manufacturing overhead*
$ 2,340
1.20
$ 4,680
2.40
$25.40
*Based on direct labour-hours
During April, the factory worked only 760 direct labour-hours and produced 2,000 robes. The following actual costs were recorded
during the month:
Per Unit
of
Direct materials (6,000 metres)
Direct labour
Total
$ 36,000
Product
$18.00
$ 7,600
3.80
Variable manufacturing overhead
Fixed manufacturing overhead
$ 3,800
1.90
$ 4,600
2.30
$26.00
At standard, each robe should require 2.8 metres of material. All of the materials purchased during the month were used in production.
Required:
Compute the following variances for April:
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VIEWStep 2: Calculation of Direct material price variance and Direct material quantity variance:
VIEWStep 3: Calculation of Labor rate variance and Labor Efficiency variance:
VIEWStep 4: Calculation of the variable manufacturing overhead spending and efficiency variances:
VIEWStep 5: Calculation of fixed manufacturing overhead budget and volume variances:
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