Mackinaw Inc. processes a base chemical into plastic. Standard costs and actual costs for direct materials, direct labor, and factory overhead incurred for the manufacture of 6,000 units of product were as follows: Standard Costs Actual Costs Direct materials 7,800 lb. at $5.90 7,700 lb. at $5.80 Direct labor 1,500 hrs. at $16.10 1,530 hrs. at $16.40 Factory overhead Rates per direct labor hr., based on 100% of normal capacity of 1,560 direct labor hrs.: Variable cost, $3.00 $4,460 variable cost Fixed cost, $4.70 $7,332 fixed cost Each unit requires 0.25 hour of direct labor.
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.
Mackinaw Inc. processes a base chemical into plastic.
| Standard Costs | Actual Costs | ||
| Direct materials | 7,800 lb. at $5.90 | 7,700 lb. at $5.80 | |
| Direct labor | 1,500 hrs. at $16.10 | 1,530 hrs. at $16.40 | |
| Factory overhead | Rates per direct labor hr., | ||
| based on 100% of normal | |||
| capacity of 1,560 direct | |||
| labor hrs.: | |||
| Variable cost, $3.00 | $4,460 variable cost | ||
| Fixed cost, $4.70 | $7,332 fixed cost |
Each unit requires 0.25 hour of direct labor.
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