Marvel Parts, Incorporated, manufactures auto accessories. One of the company's products is a set of seat covers that can be adjusted to fit nearly any small car. The company has a standard cost system in use for all of its products. According to the standards that have been set for the seat covers, the factory should work 1,010 hours each month to produce 2,020 sets of covers. The standard costs associated with this level of production are: Direct materials Direct labor Variable manufacturing overhead (based on direct labor-hours) Total Per Set of Covers $36,360 $18.00 $7,070 3.50 $ 3,030 1.50 $ 23.00 During August, the factory worked only 1,080 direct labor- hours and produced 2,700 sets of covers. The following actual costs were recorded during the month: Total Per Set of Covers Direct materials (8,100 yards) $46,980 $17.40 Direct labor $9,990 3.70 Variable manufacturing overhead $4,590 1.70 $ 22.80 At standard, each set of covers should require 2.0 yards of material. All of the materials purchased during the month were used in production.
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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