Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 84,000 fans evenly over the next quarter at the following costs: direct material, $1,932,000; direct labor, $588,000; variable production overhead, $659,400; and fixed production overhead, $951,000. The $951,000 amount includes $96,000 of straight-line depreciation and $108,000 of supervisory salaries. Shortly after the conclusion of the quarter’s first month, Johnson reported the following costs: Direct material $ 601,500 Direct labor 187,600 Variable production overhead 225,000 Depreciation 32,000 Supervisory salaries 38,700 Other fixed production overhead 248,000 Total $ 1,332,800 Dave Kellerman and his crews turned out 25,000 fans during the month—a remarkable feat given that the firm’s manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Johnson’s general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes of keeping his job. Required: Which of the two budgets would be more useful when planning the company’s cash needs over a range of activity? Prepare a performance report that compares static budget and actual costs for the period just ended (i.e., the report that Kellerman likely used when assessing his performance). Prepare a performance report that compares flexible budget and actual costs for the period just ended (i.e., the report that the general manager likely used when assessing Kellerman’s performance).
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.
Johnson Electrical produces industrial ventilation fans. The company plans to manufacture 84,000 fans evenly over the next quarter at the following costs: direct material, $1,932,000; direct labor, $588,000; variable production
Shortly after the conclusion of the quarter’s first month, Johnson reported the following costs:
| Direct material | $ | 601,500 | |
| Direct labor | 187,600 | ||
| Variable production overhead | 225,000 | ||
| Depreciation | 32,000 | ||
| Supervisory salaries | 38,700 | ||
| Other fixed production overhead | 248,000 | ||
| Total | $ | 1,332,800 | |
Dave Kellerman and his crews turned out 25,000 fans during the month—a remarkable feat given that the firm’s manufacturing plant was closed for several days because of storm damage and flooding. Kellerman was especially pleased with the fact that overall financial performance for the period was favorable when compared with the budget. His pleasure, however, was very short-lived, as Johnson’s general manager issued a stern warning that performance must improve, and improve quickly, if Kellerman had any hopes of keeping his job.
Required:
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Which of the two budgets would be more useful when planning the company’s cash needs over a range of activity?
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Prepare a performance report that compares static budget and actual costs for the period just ended (i.e., the report that Kellerman likely used when assessing his performance).
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Prepare a performance report that compares flexible budget and actual costs for the period just ended (i.e., the report that the general manager likely used when assessing Kellerman’s performance).
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5-a.Which of the following two reports is preferred?
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5-b.Which of the following statements is false?
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