Springsteen Company manufactures guitars. The company uses a standard, job-order cost-accounting system in two production departments. In the Construction Department, the wooden guitars are built by highly skilled craftsmen and coated with several layers of lacquer. Then the units are transferred to the Finishing Department, where the bridge of the guitar is attached and the strings are installed. The guitars also are tuned and inspected in the Finishing Department. The diagram below depicts the production process. Each finished guitar contains seven pounds of veneered wood. In addition, one pound of wood is typically wasted in the production process. The veneered wood used in the guitars has a standard price of $14 per pound. The other parts needed to complete each guitar, such as the bridge and strings, cost $17 per guitar. The labor standards for Springsteen’s two production departments are as follows: Construction Department: 5 hours of direct labor at $21 per hour Finishing Department: 3 hours of direct labor at $17 per hour The following pertains to the month of July. 1. There were no beginning or ending work-in-process inventories in either production department. 2. There was no beginning finished-goods inventory. 3. Actual production was 510 guitars, and 310 guitars were sold on account for $405 each. 4. The company purchased 6,100 pounds of veneered wood at a price of $14.50 per pound. 5. Actual usage of veneered wood was 4,600 pounds of the wood purchased during July. 6. Enough parts (bridges and strings) to finish 610 guitars were purchased at a cost of $9,010. 7. The Construction Department used 2,400 direct-labor hours. The total direct-labor cost in the Construction Department was $48,000. 8. The Finishing Department used 1,580 direct-labor hours. The total direct-labor cost in that department was $28,440. 9. There were no direct-material variances in the Finishing Department. 3. Complete the following cost variance report for July. Springsteen Company investigates all variances greater than $5,000 or 5%.
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.
Springsteen Company manufactures guitars. The company uses a standard,
Each finished guitar contains seven pounds of veneered wood. In addition, one pound of wood is typically wasted in the production process. The veneered wood used in the guitars has a standard price of $14 per pound. The other parts needed to complete each guitar, such as the bridge and strings, cost $17 per guitar. The labor standards for Springsteen’s two production departments are as follows:
Construction Department: 5 hours of direct labor at $21 per hour
Finishing Department: 3 hours of direct labor at $17 per hour
The following pertains to the month of July.
1. There were no beginning or ending work-in-process inventories in either production department.
2. There was no beginning finished-goods inventory.
3. Actual production was 510 guitars, and 310 guitars were sold on account for $405 each.
4. The company purchased 6,100 pounds of veneered wood at a price of $14.50 per pound.
5. Actual usage of veneered wood was 4,600 pounds of the wood purchased during July.
6. Enough parts (bridges and strings) to finish 610 guitars were purchased at a cost of $9,010.
7. The Construction Department used 2,400 direct-labor hours. The total direct-labor cost in the Construction Department was $48,000.
8. The Finishing Department used 1,580 direct-labor hours. The total direct-labor cost in that department was $28,440.
9. There were no direct-material variances in the Finishing Department.
3. Complete the following cost variance report for July. Springsteen Company investigates all variances greater than $5,000 or 5%.
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