4-34 Job costing; variation on actual, normal, and variation from normal costing. Creative Solutions designs Web pages for clients in the education sector. The company’s job-costing system has a single direct cost category (Web-designing labor) and a single indirect cost pool composed of all overhead costs. Overhead costs are allocated to individual jobs based on direct labor-hours. The company employs six Web designers. Budgeted and actual information regarding Creative Solutions follows: Budget for 2017: Direct labor costs $273,000 Direct labor-hours 10,500 Overhead costs $157,500 Actual results for 2017: Direct labor costs $285,000 Direct labor-hours 11,400 Overhead costs $159,600 1. Compute the direct-cost rate and the indirect-cost rate per Web-designing labor-hour for 2017 under (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs. 2. Which method would you suggest Creative Solutions use? Explain. 3. Creative Solutions’ Web design for Greenville Day School was budgeted to take 86 direct labor-hours. The actual time spent on the project was 79 hours. Compute the cost of the Greenville Day School job using (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted rates for direct costs.
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.
4-34
designs Web pages for clients in the education sector. The company’s job-costing system has a single
direct cost category (Web-designing labor) and a single indirect cost pool composed of all
Overhead costs are allocated to individual jobs based on direct labor-hours. The company employs six Web
designers. Budgeted and actual information regarding Creative Solutions follows:
Budget for 2017:
Direct labor costs $273,000
Direct labor-hours 10,500
Overhead costs $157,500
Actual results for 2017:
Direct labor costs $285,000
Direct labor-hours 11,400
Overhead costs $159,600
1. Compute the direct-cost rate and the indirect-cost rate per Web-designing labor-hour for 2017 under
(a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted
rates for direct costs.
2. Which method would you suggest Creative Solutions use? Explain.
3. Creative Solutions’ Web design for Greenville Day School was budgeted to take 86 direct labor-hours.
The actual time spent on the project was 79 hours. Compute the cost of the Greenville Day School job
using (a) actual costing, (b) normal costing, and (c) the variation from normal costing that uses budgeted
rates for direct costs.
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