Montoursville Control Company, which manufactures electrical switches, uses a standard-costing system. The standard production overhead costs per switch are based on direct-labor hours and are as follows: Variable overhead (5 direct-labor hours @ $8.00 per hour) ....................... $ 40Fixed overhead (5 direct-labor hours @ $12.00 per hour)* ........................... 60Total overhead ................................................................................................................. $100*Based on capacity of 300,000 direct-labor hours per month. The following information is available for the month of October.• Variable-overhead costs were $2,340,000.• Fixed-overhead costs were $3,750,000.• 56,000 switches were produced, although 60,000 switches were scheduled to be produced.• 275,000 direct-labor hours were worked at a total cost of $2,550,000.Required: Compute the variable-overhead spending and efficiency variances and the fixed-overhead budget and volume variances for October. Indicate whether a variance is favorable or unfavorable whereappropriate.
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.
Montoursville Control Company, which manufactures electrical switches, uses a standard-costing system. The standard production
Variable overhead (5 direct-labor hours @ $8.00 per hour) ....................... $ 40
Fixed overhead (5 direct-labor hours @ $12.00 per hour)* ........................... 60
Total overhead ................................................................................................................. $100
*Based on capacity of 300,000 direct-labor hours per month.
The following information is available for the month of October.
• Variable-overhead costs were $2,340,000.
• Fixed-overhead costs were $3,750,000.
• 56,000 switches were produced, although 60,000 switches were scheduled to be produced.
• 275,000 direct-labor hours were worked at a total cost of $2,550,000.
Required: Compute the variable-overhead spending and efficiency variances and the fixed-overhead budget and volume variances for October. Indicate whether a variance is favorable or unfavorable where
appropriate.
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