The standards for one carton of Wonder Wax are: Direct materials 4 lbs. @ $2.55 Direct labors 6 hrs. @ $5.25 Variable overhead (based on direct labor hours) 6 hrs. @ $3.40 During the week ended December 4, the following activity took place: • 4,600 lbs. of raw material were purchased for inventory at a cost of $2.63 per pound; • 1,050 cartons of finished product were produced; • 4,225 lbs. of raw material were used; • 6,140 labor hours were worked at a total cost of $33,463; • $20,569 actual variable overhead costs were incurred. Calculate each of the following variances: (a.) Price variance for raw materials purchased. (b.) Raw materials usage variance. (c.) Direct labor rate 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 standards for one carton of Wonder Wax are:
Direct materials 4 lbs. @ $2.55
Direct labors 6 hrs. @ $5.25
Variable
During the week ended December 4, the following activity took place:
• 4,600 lbs. of raw material were purchased for inventory at a cost of $2.63 per pound;
• 1,050 cartons of finished product were produced;
• 4,225 lbs. of raw material were used;
• 6,140 labor hours were worked at a total cost of $33,463;
• $20,569 actual variable overhead costs were incurred.
Calculate each of the following variances:
(a.) Price variance for raw materials purchased.
(b.) Raw materials usage variance.
(c.) Direct labor rate variance.
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