Mehta Bakers Ltd produce breads, cakes and pastries for sale to supermarkets. Their best-selling product is the Mehta Naan. The company sources flour for the product from two flour millers. Their products are cailed AlIBake and CookSure respectively. Whilst basic quality is important the decision on which supplier to use is primarily based on price. A standard production batch of Naans uses 100 kilos of a flour. Either flour can be used to produce the product. In the preparation of their budget for 2020, Mehta Ltd forecast an average price for CookSure of £0.4 per kilo, and, as the price for AllBake was higher than this, prepared the budget based on using CookSure. At the end of the period, the budgeted output of 1000 batches was achieved. The actual use of CookSure flour being 95,000 kilos at actual cost of £37,000. However, now looking back over the year, the management of the firm have found that the average market prices that existed for CookSure was £0.9 per kilo, and for AllBake £0.6 per kilo. Flours cannot be mixed or changed in the baking process as changes to the setting of machinery and the baking process are required. Therefore, Mehta does not alow the operating managers to reverse the initial decision to use CookSure on a day-to-day basis if the relative price of the substitute flour changes. 1. Caiculate materials cost, price and usage variances based on a static standard cost for the materials. 2. Calculate revised variances allowing for planning and operational issues.
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.
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INTRODUCTION
Cost of materials used in producing a good or performing a service is known as material cost. All indirect materials required in the production process, such as household cleaners, are not included in the cost of materials.
The terms preset cost, anticipated cost, expected cost, budgeted unit cost, predicted cost, and cost as it must be are all used to describe typical costs. The operating income plan and operational budgets of a company frequently contain standard costs as a major element.
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