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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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Extract of sample "COST AND MANAGEMENT ACCOUNTING"

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)MonthMachine HoursElectricity CostJanuary2,00018,900February2,40021,500March1,40014,000April2,60023,500May3,30028,750June3,30022,700July3,60025,250August3,00023,250September1,50016,000October3,30026,500November4,20031,500The cost function can be calculated through the linear regression analysis.

The result of the regression analysis is as followsRegression StatisticsMultiple R0.943848087R Square0.890849211Adjusted R Square0.878721346Standard Error1816.144951Observations11  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 3Material Variance       Price VarianceActual QuantityStandard PriceActual 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.

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