Thornton Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department’s static budget and actual results for Year 3 follow: Static Budget Actual Results Production in units 22,000 kits 24,500 kits Direct materials $ 165,000 $ 221,250 Direct labor 143,000 153,350 Variable manufacturing overhead 33,000 39,450 Total variable costs 341,000 414,050 Fixed manufacturing overhead 208,000 202,500 Total manufacturing cost $ 549,000 $ 616,550 Required a. Convert the static budget into a flexible budget. b. Calculate the 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.
Thornton Medical Equipment Company makes a blood pressure measuring kit. Jason McCoy is the production manager. The production department’s static budget and actual results for Year 3 follow:
| Static Budget | Actual Results | ||||||||
| Production in units | 22,000 kits | 24,500 kits | |||||||
| Direct materials | $ | 165,000 | $ | 221,250 | |||||
| Direct labor | 143,000 | 153,350 | |||||||
| Variable manufacturing |
33,000 | 39,450 | |||||||
| Total variable costs | 341,000 | 414,050 | |||||||
| Fixed manufacturing overhead | 208,000 | 202,500 | |||||||
| Total |
$ | 549,000 | $ | 616,550 | |||||
Required
a. Convert the static budget into a flexible budget.
b. Calculate the variances.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
