Interplast Ghana is a rubber fabricating company based in North Industrial Area. The company produces rubber buckets for the West African market and plans to produce 1,000 units of buckets in the month of January. The bucket requires a single operation and the standard cost for the operation is presented below: Standard cost card (bucket) GH¢ Direct material (plastics): 10 kg at GH¢ 0.50 per kg) 5 Direct labour (5hours@ GH¢ 20 per hour) 100 Variable overheads (3 hours at GH¢ 2 per direct labour) 6 Total standard variable cost 111 Standard contribution margin 29 Standard selling price 140 Budget statement for the month of January GH¢ GH¢ Sales (1,000 units of buckets at GH¢ 140 per unit) 140,000 Direct materials: (10,000 at GH¢ 0.50) 5,000 Direct labour (4,000 hours @GH¢ 20per hour) 80,000 Variable overheads (4,000 hours @GH¢ 2 per direct hour) 8000 93,000 Budget contribution 47,000 Fixed overheads 20,000 Budgeted profit 27,000 The annual budgeted fixed overheads are GH¢ 240,000 and are assume to be incurred evenly throughout the year. Actual results for April are: GH¢ GH¢ Sales (800 units of buckets at GH¢ 150 per unit) 120,000 Direct materials: (9,000kg at GH¢ 0.60) 5,400 Direct labour (3,500 hours @GH¢ 18 per hour) 63,000 Variable overheads (3,500 hours @GH¢ 2.50 per direct hour) 8,750 77,150 Contribution 42,850 Fixed overheads 18,000 Profit 24,850 The production overheads are charged to production on the basis of direct labour hours. Actual production and sales are 800 units of buckets. You are required to calculate all the standard variances listed above and reconcile the results thereof.
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.
Interplast Ghana is a rubber fabricating company based in North Industrial Area. The company produces rubber buckets for the West African market and plans to produce 1,000 units of buckets in the month of January. The bucket requires a single operation and the
|
Standard cost card (bucket) |
GH¢ |
|
Direct material (plastics): 10 kg at GH¢ 0.50 per kg) |
5 |
|
Direct labour (5hours@ GH¢ 20 per hour) |
100 |
|
Variable |
6 |
|
Total standard variable cost |
111 |
|
Standard contribution margin |
29 |
|
Standard selling price |
140 |
|
Budget statement for the month of January |
GH¢ |
GH¢ |
|
Sales (1,000 units of buckets at GH¢ 140 per unit) |
|
140,000 |
|
Direct materials: (10,000 at GH¢ 0.50) |
5,000 |
|
|
Direct labour (4,000 hours @GH¢ 20per hour) |
80,000 |
|
|
Variable overheads (4,000 hours @GH¢ 2 per direct hour) |
8000 |
|
|
|
93,000 |
|
Budget contribution |
47,000 |
|
Fixed overheads |
20,000 |
|
Budgeted profit |
27,000 |
The annual budgeted fixed overheads are GH¢ 240,000 and are assume to be incurred evenly throughout the year.
|
Actual results for April are: |
|
|
|
|
GH¢ |
GH¢ |
|
Sales (800 units of buckets at GH¢ 150 per unit) |
|
120,000 |
|
Direct materials: (9,000kg at GH¢ 0.60) |
5,400 |
|
|
Direct labour (3,500 hours @GH¢ 18 per hour) |
63,000 |
|
|
Variable overheads (3,500 hours @GH¢ 2.50 per direct hour) |
8,750 |
|
|
|
|
77,150 |
|
Contribution |
|
42,850 |
|
Fixed overheads |
|
18,000 |
|
Profit |
|
24,850 |
The production overheads are charged to production on the basis of direct labour hours. Actual production and sales are 800 units of buckets.
You are required to calculate all the standard variances listed above and reconcile the results thereof.
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