5-22 ABC, process costing. Sander company produces mathematical and financial calculators and operates at capacity. Data related to the two products are presented below: Annual production in unit Mathematical: $45,000 Financial: $90,000 Direct Materials Cost Mathematical: $180,000 Financial: $360,000 Direct Manufacturing Labour Cost Mathematical: $90,000 Financial: $180,000 Direct Manufacturing Labour Hours Mathematical: 4,500 Financial: 9,000 Machine Hours Mathematical: 30,000 Financial: 60,000 Number of production runs Mathematical: 45 Financial: 45 Inspection Hours Mathematical: 1200 Financial: 600 Total Manufacturing Overhead are as follows: Machining Cost Total $360,000 Set up Cost Total $108,000 Inspection Cost Total $117,000 Required: Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product. Compute the manufacturing overhead cost for each product. How might Sander's Manager use the new cost information from it's activity based costing system to better manage it's business? Compute the manufacturing cost for each product.
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.
5-22 ABC,
Sander company produces mathematical and financial calculators and operates at capacity. Data related to the two products are presented below:
Annual production in unit
Mathematical: $45,000
Financial: $90,000
Direct Materials Cost
Mathematical: $180,000
Financial: $360,000
Direct Manufacturing Labour Cost
Mathematical: $90,000
Financial: $180,000
Direct Manufacturing Labour Hours
Mathematical: 4,500
Financial: 9,000
Machine Hours
Mathematical: 30,000
Financial: 60,000
Number of production runs
Mathematical: 45
Financial: 45
Inspection Hours
Mathematical: 1200
Financial: 600
Total Manufacturing
Machining Cost Total $360,000
Set up Cost Total $108,000
Inspection Cost Total $117,000
Required:
- Choose a cost driver for each overhead cost pool and calculate the manufacturing overhead cost per unit for each product.
- Compute the manufacturing overhead cost for each product.
- How might Sander's Manager use the new cost information from it's activity based costing system to better manage it's business?
- Compute the
manufacturing cost for each product.
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