The standard cost card for product Alpha is as follows: £ Direct material 5kg@ £11.50 per kg 57.50 Direct Labour 4 labour hours @£9 per hour 36.00 93.50 In the period just ended 3,000 units were produced and costs were incurred as follows: Quantity Cost (£) Direct material 15900kg 180465 Direct labour 11550 hours 106260 286725 Required: Calculate the direct materials price variance for product Alpha. Calculate the direct labour rate variance for product Alpha. Explain the factors that need to be taken into account when deciding to investigate a variance.
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 standard cost card for product Alpha is as follows:
|
|
|
£ |
|
Direct material |
5kg@ £11.50 per kg |
57.50 |
|
Direct Labour |
4 labour hours @£9 per hour |
36.00 |
|
|
|
93.50 |
In the period just ended 3,000 units were produced and costs were incurred as follows:
|
|
Quantity |
Cost (£) |
|
Direct material |
15900kg |
180465 |
|
Direct labour |
11550 hours |
106260 |
|
|
|
286725 |
Required:
-
Calculate the direct materials price variance for product Alpha.
-
Calculate the direct labour rate variance for product Alpha.
-
Explain the factors that need to be taken into account when deciding to investigate a variance.
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