ABC company manufactures rivets in an automated factory. The company uses standard costing system to...
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Accounting
ABC company manufactures rivets in an automated factory. The company uses standard costing system to control costs & to assign costs to its inventory.
| Price Standard | Quantity Standard | |
| Direct material | $3/ unit | 16 meters/rivet |
| Direct labour | $11 per hour | 3 hours per rivet |
Variable overheads are estimated at $5.50 per rivet. Fixed overheads are $26,000 per month. The standard fixed overhead rate is based on an estimated production of 1,000 per month.
Required:
a. Prepare a production budget for the coming year based on a planned production of 12,000 rivets.
b. Compare the budget prepared in a) with a flexible budget based on actual productio of 15,000 rivets.
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