Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures. Direct materials (15 lbs. @ $4 per lb.) $60 Direct labor (2 hrs. @ $15 per hr.) 30 During June the company incurred the following actual costs to produce 8,500 units. Direct materials (129,500 lbs. @ $3.75 per lb.) $ 485,625 Direct labor (21,800 hrs. @ $15.10 per hr.). 329,180 AH = Actual HoursSH = Standard HoursAR = Actual RateSR = Standard RateAQ = Actual QuantitySQ = Standard QuantityAP = Actual PriceSP = Standard Price(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no 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.
Reed Corp. has set the following standard direct materials and direct labor costs per unit for the product it manufactures.
| Direct materials (15 lbs. @ $4 per lb.) | $60 | |||
| Direct labor (2 hrs. @ $15 per hr.) | 30 | |||
During June the company incurred the following actual costs to produce 8,500 units.
| Direct materials (129,500 lbs. @ $3.75 per lb.) | $ | 485,625 | ||
| Direct labor (21,800 hrs. @ $15.10 per hr.). | 329,180 | |||
AH = Actual Hours
SH = Standard Hours
AR = Actual Rate
SR = Standard Rate
AQ = Actual Quantity
SQ = Standard Quantity
AP = Actual Price
SP = Standard Price
(1) Compute the direct materials price and quantity variances. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
(2) Compute the direct labor rate variance and the direct labor efficiency variance. (Indicate the effect of each variance by selecting for favorable, unfavorable, and no variance.)
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