Set-ups in period 15 45 Orders handled in the period 12 60 Overheads for Period $
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.
Question 2
Two products, A and B, are made using similar equipment and methods. The data for last period
are:
Product A Product B
Units produced 6 000 8 000
Labour hours per unit 1 2
Machine hours per unit 4 2
Set-ups in period 15 45
Orders handled in the period 12 60
Relating to production set-up 179 000
Relating to order handling 30 000
Relating to machine activity 55 000
264 000
A. Calculate the overheads to be absorbed per unit of each product, based on:
i. absorption costing using labour hour absorption rate.
ii. an ABC approach using suitable cost drivers.
B. Give TWO (2) advantages and TWO (2) disadvantages of the ABC System.
Step by step
Solved in 6 steps
