At the end of June 2019, Ash Design has spent RM 320,000 on 80,000 meters of fabric in the production of 20,000 dolls. The production manager is concerned that they are paying more than the company's standard RM 2 per meter fabric and is fully aware of the standard requirement of 8 meters of fabric per doll. The company spent RM 450,000 for 90,000 direct labor hours in the production of 20,000 dolls. The standard labor per doll is 4 hours at an hourly rate of RM 4. A review of Ash Design's 6-months performance revealed that the company had produced 20,000 dolls and incurred RM 90,000 of variable production overheads and worked 90,000 direct labor hours. The standard variable production overhead rate is RM 0.75 per direct hour for each doll and requires 4 standard direct labor hours. Ash Design budgeted and actual fixed overhead incurred for the last six months are RM 180,000 and RM 152,000 respectively. The annual budgeted production volume for Ash Design is 50,000 dolls. Based on the information given, a) CALCULATE the following: Direct material variance Direct labor variance Variable overhead variance Fixed overhead 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.
At the end of June 2019, Ash Design has spent RM 320,000 on 80,000 meters of fabric in the production of 20,000 dolls. The production manager is concerned that they are paying more than the company's standard RM 2 per meter fabric and is fully aware of the standard requirement of 8 meters of fabric per doll. The company spent RM 450,000 for 90,000 direct labor hours in the production of 20,000 dolls. The standard labor per doll is 4 hours at an hourly rate of RM 4. A review of Ash Design's 6-months performance revealed that the company had produced 20,000 dolls and incurred RM 90,000 of variable production
Ash Design budgeted and actual fixed overhead incurred for the last six months are RM 180,000 and RM 152,000 respectively. The annual budgeted production volume for Ash Design is 50,000 dolls.
Based on the information given,
- a) CALCULATE the following:
- Direct material variance
- Direct labor variance
- Variable overhead variance
- Fixed overhead variance
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