[prosper19]

Hi John,

With normal costing I meant how would the income statement look like if a firm was undertaking normal job costing.

Thanks

[prosper19]

Hi John

A few questions about the above problem.

Non-manufacturing costs
Budgeted and actual selling and administrative costs related to Dance are as follows:
Variable costs per unit are $1.00
Fixed costs for the period total is $2,000.00

If the period costs for the period are as above how does variable period costs get calculated, I worked it out as 2100 x $1.00 = 2100 under standard absorption costing and $2200 x $1.00 = $2200 under normal absorption costing.

If the open inventory is 500 units does this get included in Cost of Goods Sold (COGS) and does it get multiplied by the COGS/unit; so 500 x $37.08 = 18,540. Does the 500 get included for both Standard and Normal Costing.

If the variances get written off to COGS does this get included in the COGS total amount on the income statement for both standard and normal costing?

Thanks.

[prosper19]

Hi John,

I see where I have went wrong, I should be multiplying by actual hours of production not budgeted hours.
Also with volume variance is it is still 475 but favorable because there was more actual production units than budgeted units.
Are these assumptions correct?

PS. Your lectures are great; I finally get it….I think.

[prosper19]

Hi John,

So the calculations would be..

Variable Overheads
Expenditure variance
(2400x$3) – (2400x$2.80)
=7200-6720
=480U

Efficiency variance
(2400x$2.80)-(2100x$2.80)
=6720-5880
=840U

Fixed Overheads
Expenditure variance
$11500-$9975
=$1525

Volume variance
(2,200 x $4.75 ) – (2,100 x $4.75*)
=$10,450 -$9,975
=475U

As it takes 1hr for a dance shoe unit to be made wouldn’t the cost per unit be $4.75.

Thanks!

[Author]

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