The Top Company uses a standard costing system and produces custom made plastic toys using the following inputs – and actual data: Input Standard Input per Toy Standard Cost of Input ACTUAL Cost to Produce 270,000 Toys ACTUAL Quantity Used to Produce 270,000 Toys Plastic 380g $0.04/gram $4,044,000 99,600,000 grams Direct Labour 0.25 hours $11.00/hour Required: What is the standard cost of one toy? Calculate the Material PRICE variance using actual production numbers given above and label it FAVOURABLE or UNFAVOURABLE. Calculate the Material QUANTITY variance using actual production numbers given above and label whether it is FAVOURABLE or UNFAVOURABLE. Should only unfavourable variances be investigated – WHY or WHY NOT?
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.
1.
The Top Company uses a
|
Input |
Standard Input per Toy |
Standard Cost of Input |
|
ACTUAL Cost to Produce 270,000 Toys |
ACTUAL Quantity Used to Produce 270,000 Toys |
|
Plastic |
380g |
$0.04/gram |
|
$4,044,000 |
99,600,000 grams |
|
Direct Labour |
0.25 hours |
$11.00/hour |
|
|
|
Required:
- What is the standard cost of one toy?
- Calculate the Material PRICE variance using actual production numbers given above and label it FAVOURABLE or UNFAVOURABLE.
- Calculate the Material QUANTITY variance using actual production numbers given above and label whether it is FAVOURABLE or UNFAVOURABLE.
- Should only unfavourable variances be investigated – WHY or WHY NOT?
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