Product-Costing Accuracy, Consumption Ratios Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two overhead activities, with the following costs Setting up equipment: $6,000 Machining 22,000 The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production. Line Item Description: Elegant Fina Direct Labor $9,000 $3,000 Direct materials $3,000 $3,000 Units $3,000 $3,000 Machine Hours $500 $4,500 Setup Hours $100 $100 1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain. Calculate the consumption ratios for each activity. Rounded to 1 decimal place Line Item Description Elegant Fina Machining ______ ______ Setups _______ _______ 3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent and do not round intermediate calculations Line Item Description Overhead Cost Elegant _____________ Fina ______________ 3. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round to the nearest cent Line Item Description Overhead Cost Elegant ______________ Fina ______________
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Product-Costing Accuracy, Consumption Ratios
Plata Company produces two products: a mostly handcrafted soft leather briefcase sold under the label Maletin Elegant and a leather briefcase produced largely through automation and sold under the label Maletin Fina. The two products use two
Setting up equipment: $6,000
Machining 22,000
The controller has collected the expected annual prime costs for each briefcase, the machine hours, the setup hours, and the expected production.
Line Item Description: Elegant Fina
Direct Labor $9,000 $3,000
Direct materials $3,000 $3,000
Units $3,000 $3,000
Machine Hours $500 $4,500
Setup Hours $100 $100
1. Conceptual Connection: Do you think that the direct labor costs and direct materials costs are accurately traced to each briefcase? Explain.
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Calculate the consumption ratios for each activity. Rounded to 1 decimal place
Line Item Description Elegant Fina
Machining ______ ______
Setups _______ _______
3a. Calculate the overhead cost per unit for each briefcase by using a plantwide rate based on direct labor costs. Round to the nearest cent and do not round intermediate calculations
Line Item Description Overhead Cost
Elegant _____________
Fina ______________
3. Conceptual Connection: Calculate the overhead cost per unit for each briefcase by using overhead rates based on machine hours and setup hours. Round to the nearest cent
Line Item Description Overhead Cost
Elegant ______________
Fina ______________
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