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COST AND MANAGEMENT ACCOUNTING - Speech or Presentation Example

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The reason for the favorable price variance could be due the discount allowed by the supplier of the material A when initially the company initially did not expected it. In addition, the primary reason for the adverse quantity variance could be that due to wastage of the…
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COST AND MANAGEMENT ACCOUNTING
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Question No Variable Cost Fixed Cost Mixed Cost The cost of materials used to build a desk  Rent paid on a factory building  The flat fee paid for a copier plus the per-copy charge 
The cost of hourly workers in a Laundromat 
Depreciation on a factory equipment 
 
The paycheck of a worker paid on commission alone 
The salary of the factory supervisor 
 
The cost of electricity used to run the air conditioning unit 
 
 
Question No. 2
(a)
Month
Machine Hours
Electricity Cost
January
2,000
18,900
February
2,400
21,500
March
1,400
14,000
April
2,600
23,500
May
3,300
28,750
June
3,300
22,700
July
3,600
25,250
August
3,000
23,250
September
1,500
16,000
October
3,300
26,500
November
4,200
31,500
The cost function can be calculated through the linear regression analysis. The result of the regression analysis is as follows
Regression Statistics
Multiple R
0.943848087
R Square
0.890849211
Adjusted R Square
0.878721346
Standard Error
1816.144951
Observations
11
 
Coefficients
Intercept
7,466.86
X Variable 1
5.55
Thus the cost function for the given equation is
Total Cost = 7.466.86 + (number of hours) x 5.55
(b)
Expected Production
40,000
Variable Cost
221,849
Fixed Cost
7,467
Total Cost
229,316
(c)
Question Number 3
Material Variance
 
 
 
 
 
 
 
Price Variance
Actual Quantity
Standard Price
Actual Price
 
105,000.00
3.00
2.70
 
 
 
 
 
Difference in Price
0.30
 
 
Variance
31,500.00
 
 
Adverse or Favorable
Favorable
 
 
 
 
 
Quantity Variance
Standard Price
Actual Quantity
Standard Quantity Allowed
 
3.00
105,000.00
100,000.00
 
 
 
 
 
Difference in quantity
5,000.00
 
 
Variance
15,000.00
 
 
Adverse or Favorable
Adverse
 
 
 
 
 
 
 
 
 
Labor Variance
 
 
 
 
 
 
 
Rate Variance
Actual hours worked
Standard rate
Actual rate
 
76,000.00
8.00
8.25
 
 
 
 
 
Difference in rate
0.25
 
 
Variance
19,000.00
 
 
Adverse or Favorable
Adverse
 
 
 
 
 
 
 
 
 
Efficiency Variance
Standard rate
Actual hours worked
Standard hours Allowed
 
8.00
76,000.00
75,000.00
 
 
 
 
 
Difference in hours
1,000.00
 
 
Variance
8,000.00
 
 
Adverse or Favorable
Adverse
 
The reason for the favorable price variance could be due the discount allowed by the supplier of the material A when initially the company initially did not expected it. In addition, the primary reason for the adverse quantity variance could be that due to wastage of the material during the course of the manufacturing, the quantity actually utilized in the production exceeds the actual quantity allowed for the production.
The labor efficiency and labor rate both show an adverse variance. The labor might have demanded a higher wage per hour due to the increasing inflation in the economy thus resulting in per hour cost of labor. The adverse efficiency variance could be due to the idle working hours or due to the fact that the company was not able to accurately anticipate the number of hours required for the production of per unit of the product. Read More
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