Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller. Direct labor: Direct material:Quantity, .25 hour Quantity, 4 kilogramsRate, $16 per hour Price, $.80 per kilogram Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:Direct labor: $211,900 for 13,000 hoursDirect material: $170,100 for 210,000 kilograms Required:1. Use the variance formulas to compute the direct-material price and quantity variances, the directmaterial purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.2. Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show how the solution will change if the following information changes: the standard direct-labor rate is $15 per hour, and the standard direct-material price is $.79 per kilogram.
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.
Saskatewan Can Company manufactures recyclable soft-drink cans. A unit of production is a case of 12 dozen cans. The following standards have been set by the production-engineering staff and the controller.
Direct labor: Direct material:
Quantity, .25 hour Quantity, 4 kilograms
Rate, $16 per hour Price, $.80 per kilogram
Actual material purchases amounted to 240,000 kilograms at $.81 per kilogram. Actual costs incurred in the production of 50,000 units were as follows:
Direct labor: $211,900 for 13,000 hours
Direct material: $170,100 for 210,000 kilograms
Required:
1. Use the variance formulas to compute the direct-material price and quantity variances, the directmaterial purchase price variance, and the direct-labor rate and efficiency variances. Indicate whether each variance is favorable or unfavorable.
2. Build a spreadsheet: Construct an Excel spreadsheet to solve the preceding requirement. Show how the solution will change if the following information changes: the standard direct-labor rate is $15 per hour, and the standard direct-material price is $.79 per kilogram.
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