The accountant for Barry Ltd compares each month’s actual results with a monthly plan. The standard direct labour rates and the standard hours allowed, given the actual output in April, are shown in the following schedule: Standard direct labour rate per hour Standard direct labour hours allowed, given April output Labour class III $26.00 1,000 Labour class II $22.00 1,000 Labour class I $12.00 1,000 A new union contract negotiated in March resulted in actual wage rates that differed from the standard rates. The actual direct labour hours worked and the actual direct labour rates per hour for April were as follows. Actual direct labour rate per hour Actual direct labour hours Labour class III $28.00 1,100 Labour class II $23.00 1,300 Labour class I $14.00 750 Required: a) Calculate the following variances for April, indicating whether each is favourable or unfavourable: i direct labour rate variance for each labour class. ii direct labour efficiency variance for each labour class. b) Discuss two advantages and two disadvantages of a standard costing system in which the standard direct labour rates per hour are not changed during the year to reflect events such as a new labour contact
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.
The accountant for Barry Ltd compares each month’s actual results with a monthly plan. The standard
direct labour rates and the standard hours allowed, given the actual output in April, are shown in the
following schedule:
Standard direct labour rate per hour Standard direct labour hours allowed,
given April output
Labour class III $26.00 1,000
Labour class II $22.00 1,000
Labour class I $12.00 1,000
A new union contract negotiated in March resulted in actual wage rates that differed from the
standard rates. The actual direct labour hours worked and the actual direct labour rates per hour for
April were as follows.
Actual direct labour rate per hour Actual direct labour hours
Labour class III $28.00 1,100
Labour class II $23.00 1,300
Labour class I $14.00 750
Required:
a) Calculate the following variances for April, indicating whether each is favourable or unfavourable:
i direct labour rate variance for each labour class.
ii direct labour efficiency variance for each labour class.
b) Discuss two advantages and two disadvantages of a
direct labour rates per hour are not changed during the year to reflect events such as a new labour contact.
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