S_Session 05 - Product Costing - Post Class.pdf

Comparison of inventory application methods actual

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COMPARISON OF INVENTORY APPLICATION METHODS Actual Normal Standard Direct material and labor Actual output x actual cost per unit (AO x Al x AP) Actual output x actual cost per unit (AO x AI x AP) Actual output allowed x standard Cost per unit (AO x SI x SP) Manufacturing (operational) overhead Actual amount of allocation based used x actual OH rate ( AO x AI x AP) Actual amount of allocation base used x standard OH rate ( AO x AI x SP) Actual output x standard OH cost per unit (AO x SI x SP ) Feedback Slow Compromise Fast Accuracy High Compromise Low AO = Actual output (number of units produced); AI = Actual input (actual amount of the resource used per unit ; the AI for overhead is the actual amount of the allocation base used per unit); SI = Standard (or budgeted) input (budgeted amount of the resource used per unit ; the SI for overhead is the budgeted amount of the allocation base used per unit); AP and SP = the actual and standard (or budgeted) unit prices for inputs (e.g., $ per pound of material or labor hour), respectively (AP and SP for overhead are the actual and predetermined overhead rates).
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