urchased 165,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production. Direct-laborers worked 58,000 hours at a rate of $13.00 per hour. Total variable manufacturing overhead for the month was $729,060. Total advertising, sales salaries and commissions, and shipping expenses were $240,000, $470,000, and $145,000, respectively. 3. What is the materials price variance for March?
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.
Preble Company manufactures one product. Its variable manufacturing
| Direct material: 4 pounds at $9.00 per pound | $ 36.00 |
|---|---|
| Direct labor: 3 hours at $12 per hour | 36.00 |
| Variable overhead: 3 hours at $8 per hour | 24.00 |
| Total standard variable cost per unit | $ 96.00 |
The company also established the following cost formulas for its selling expenses:
| Fixed Cost per Month | Variable Cost per Unit Sold | |
|---|---|---|
| Advertising | $ 230,000 | |
| Sales salaries and commissions | $ 160,000 | $ 15.00 |
| Shipping expenses | $ 6.00 |
The planning budget for March was based on producing and selling 28,000 units. However, during March the company actually produced and sold 33,000 units and incurred the following costs:
- Purchased 165,000 pounds of raw materials at a cost of $7.20 per pound. All of this material was used in production.
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Direct-laborers worked 58,000 hours at a rate of $13.00 per hour.
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Total variable manufacturing overhead for the month was $729,060.
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Total advertising, sales salaries and commissions, and shipping expenses were $240,000, $470,000, and $145,000, respectively.
3. What is the materials price variance for March?
Lets understand the basics.
Material price variance is a variance between the price at which material should be purchased against the actual material price at which it is purchased.
Material price variance = (Standard price per pound - Actual price per pound) * Actual material purchased
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