ual labor rate $13 per hour Actual materials price $128 per ton Standard labor rate $12.50 per hour Standard materials price $130 per ton Quantities Actual hours incurred and
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 following direct materials and direct labor data pertain to the operations of Engles Manufacturing Company for the month of August.
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Costs
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| Actual labor rate | $13 | per hour | |
| Actual materials price | $128 | per ton | |
| Standard labor rate | $12.50 | per hour | |
| Standard materials price | $130 | per ton |
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Quantities
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| Actual hours incurred and used | 4,150 hours | |
| Actual quantity of materials purchased and used | 1,220 tons | |
| Standard hours used | 4,300 hours | |
| Standard quantity of materials used | 1,200 tons |
The total, price, and quantity variances for materials and labor are as follows:
| Total materials variance | $160 | Unfavorable | |
| Materials price variance | $2,440 | Favorable | |
| Materials quantity variance | $2,600 | Unfavorable | |
| Total labor variance | $200 | Unfavorable | |
| Labor price variance | $2,075 | Unfavorable | |
| Labor quantity variance | $1,875 | Favorable |
(b)
Provide two possible explanations for each of the unfavorable variances given above, and suggest where responsibility for the unfavorable result might be placed.
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