DRS Manufacturing has the following standards for one of its products: Production Costs Direct materials (2 meter @ RM5) RM10 Direct labor (0.5 hour @ RM10) RM5 During the most recent year, the following actual results were recorded: Production Costs Production 6,000 units Direct materials (11,750 meter purchased and used) RM61,100 Direct labor (2,900 hours) RM29,580 required (i) Interpret the materials price and usage variances. (ii) Interpret the labor rate and efficiency 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.
DRS Manufacturing has the following standards for one of its products:
Production Costs
| Direct materials (2 meter @ RM5) | RM10 |
| Direct labor (0.5 hour @ RM10) | RM5 |
During the most recent year, the following actual results were recorded:
Production Costs
| Production | 6,000 units |
| Direct materials (11,750 meter purchased and used) | RM61,100 |
| Direct labor (2,900 hours) | RM29,580 |
required
(i) Interpret the materials price and usage variances.
(ii) Interpret the labor rate and efficiency variances.
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