Shumaker Company manufactures a line of high-top basketball shoes. At the beginning of theyear, the following plans for production and costs were revealed:Pairs of shoes to be produced and sold 55,000Standard cost per unit:Direct materials $15Direct labor 12VOH 6FOH 3Total unit cost $36During the year, a total of 50,000 units were produced and sold. The following actual costs wereincurred:Direct materials $775,000 VOH $310,000Direct labor 590,000 FOH 180,000There were no beginning or ending inventories of raw materials. In producing the 50,000 units,63,000 hours were worked, 5% more hours than the standard allowed for the actual output.Overhead costs are applied to production using direct labor hours.Required:1. Using a flexible budget, prepare a performance report comparing expected costs for theactual production with actual costs.2. Determine the following: (a) Fixed overhead spending and volume variances and(b) Variable overhead spending and efficiency variances.
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.
Shumaker Company manufactures a line of high-top basketball shoes. At the beginning of the
year, the following plans for production and costs were revealed:
Pairs of shoes to be produced and sold 55,000
Standard cost per unit:
Direct materials $15
Direct labor 12
VOH 6
FOH 3
Total unit cost $36
During the year, a total of 50,000 units were produced and sold. The following actual costs were
incurred:
Direct materials $775,000 VOH $310,000
Direct labor 590,000 FOH 180,000
There were no beginning or ending inventories of raw materials. In producing the 50,000 units,
63,000 hours were worked, 5% more hours than the standard allowed for the actual output.
Overhead costs are applied to production using direct labor hours.
Required:
1. Using a flexible budget, prepare a performance report comparing expected costs for the
actual production with actual costs.
2. Determine the following: (a) Fixed overhead spending and volume variances and
(b) Variable overhead spending and efficiency variances.
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