n January, 2021 the following Standard Cost Card relating to the product Cleanex was extracted from the records of Quicksoap Ltd. Standard Cost Card Details $ Direct materials 4 litres @ $500 2,000 Direct labour 2 hrs @ $50 100 Total cost 2,100 Actual results for the period: Production 400 units Direct raw materials purchased 1,700 litres at a cost of $765,000. Opening stock of direct raw materials 100 litres Closing stock of direct raw materials 40 litres Direct wages $45,000 for 750 hours Required: Explain the concept of variance analysis. Calculate direct raw material price variance. Calculate direct raw material usage variance.
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.
On January, 2021 the following
Standard Cost Card
|
Details |
$ |
|
Direct materials 4 litres @ $500 |
2,000 |
|
Direct labour 2 hrs @ $50 |
100 |
|
Total cost |
2,100 |
Actual results for the period:
Production 400 units
Direct raw materials purchased 1,700 litres at a cost of $765,000.
Opening stock of direct raw materials 100 litres
Closing stock of direct raw materials 40 litres
Direct wages $45,000 for 750 hours
Required:
- Explain the concept of
variance analysis . - Calculate direct raw material price variance.
- Calculate direct raw material usage variance.
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