Puvo, Incorporated, manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours. The company uses a standard cost system and has established the following standards for one unit of product:
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.
Puvo, Incorporated, manufactures a single product in which variable manufacturing
| Standard Quantity | Standard Price or Rate | Standard Cost | |||
|---|---|---|---|---|---|
| Direct materials | 5.8 | pounds | $ 0.60 | per pound | $ 3.48 |
| Direct labor | 0.5 | hours | $ 33.50 | per hour | $ 16.75 |
| Variable manufacturing overhead | 0.5 | hours | $ 8.50 | per hour | $ 4.25 |
During March, the following activity was recorded by the company:
- The company produced 2,400 units during the month.
- A total of 19,400 pounds of material were purchased at a cost of $13,580.
- There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse.
- During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour.
- Variable
manufacturing overhead costs during March totaled $14,061.
The direct materials purchases variance is computed when the materials are purchased.
The materials price variance for March is:
D. 1,750 U
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