The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 6 machine-hours of variable manufacturing overhead at $8 per hour and 6 machine-hours of fixed manufacturing overhead at $15 per hour. Actual output produced was 4,400 units. Variable manufacturing overhead incurred was $245,000. Fixed manufacturing overhead incurred was $373,000. Actual machine-hours were 28,400. Q. Discuss possible causes of the fixed manufacturing overhead 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.
The Lopez Company uses standard costing in its manufacturing plant for auto parts. The standard cost of a particular auto part, based on a denominator level of 4,000 output units per year, included 6 machine-hours of variable manufacturing
Q. Discuss possible causes of the fixed manufacturing overhead variances.
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