Category Archive for: Standard Cost Systems

In Conclusion

We have tried to illustrate that cost information is not just for cost accountants. Indeed, it affects virtually every aspect of business operations. At Brice, the savings from purchasing inexpensive materials made the purchasing department look good but created cost overruns and other problems throughout the organization. While a cost accounting system does not solve…

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Summary of the Overhead’ Cost Variances

 The overhead spending and volume variances experienced by Brice Mills in March may be summarized us follows: Prior  to 1983, Medicare reimbursed hospitals for pattern care on a cost-plus bass. That is, the hospitals submitted the cost of a procedure, such as a tonsillectomy, and Medicare paid them that cost plus a markup for profit. After…

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labor Rate and Efficiency Variances

Brice incurred actual direct labor costs of $14,040 in March. The standard labor cost allowed for manufacturing 600 beams is only $10,800 (600 units X 1.5 hours per unit X $12 per hour). Thus the company is faced with an unfavorable labor variance of $3.240 ($10,800 – $14,040). We can gain additional insight regarding the…

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During March, Brice experienced several production delays

As-a result of these delays, only 600 beams were produced (or 100 fewer than “normal” monthly output). There were no units in process either at the beginning or the end of March. Total manufacturing costs actually incurred to produce 600 bean Is during the month were as follows: By comparing the actual sets incurred in…

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Direct Labor Standards

Establishing standard costs for direct Jabor is similar to the process of establishing direct material standards. First, the specific direct labor requirements to produce each product must be identified. Once this has been accomplished, the setting of direct labor standards involves both the wage rate and the amount of time allowed to produce each product.…

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A cost accounting system becomes more useful when· it includes the budgeted or expected amounts of manufacturing costs to serve as standards for comparison with the costs actually incurred. These budgeted amounts are called standard costs (or cost dastards). An accounting system that accumulates product. service, or process costs using standard input prices and quantities…

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