Prepare a summary of total cost variances and total sales variances. Identify possible causes for the variances and recommend corrective actions for adverse variances.
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.
Rexi Manufacturers makes a single product, X, using a single raw material A. Standard costs relating to X have been calculated as follows.
Per Unit (Rs)
Direct material, A, 10kg at Rs. 20 per kg 200
Direct labour, 5 hours at Rs.6 per hour 30
Variable production
Fixed production overhead, 5 hours at Rs.10 per hour 50
Standard cost 285
Standard profit 95
Standard selling price 380
The company expects to produce 900 units in month of April 2019.
During April 2019 the actual results are as follows.
800 units of product X were produced and sold at Rs. 312,000. 7800 kgs costing Rs. 159,900 were bought and used. 4200 hours were worked during the month and total wages were Rs. 24,150. The variable production overhead for the month was Rs. 4,900. The fixed production overhead for the month was Rs. 47,000.
- Prepare a summary of total cost variances and total sales variances.
- Identify possible causes for the variances and recommend corrective actions for adverse variances.
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