The reason for this is that many manufacturing cost are fixed and some variable costs are rather erratic, i. Mendoza has no beginning inventory and no ending inventory that month.
Sub-standard materials. To Provide a Method for Monitoring, Evaluating and Controlling Overhead Costs Using a predetermined overhead rate introduces the concept of accounting control into the system because it provides a basis for monitoring, evaluating and subsequently controlling i.
This is a different concept of control than the statistical control concept introduced in Chapter 3, although the two concepts are somewhat similar.
The valuation of excess scrap is done in the same way as the valuation of abnormal waste is done. It represents fragments or remnants of material that are left from certain type of manufacture.
At the end of the month, the direct materials inventory of Flor was P25, lower than May 1 inventory level. This is because it is a mixed price and quantity variance, and normally there is no way to separate the price and quantity elements.