5-4A Stage Two ABC for Manufacturing Assume The Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period: Activity Cost Pool Activity Cost Activity Cost Driver Machine setup $900,000 2,500 setup hours Materials handling 820,000 4,000 materials moves Machine operation 400,000 20,000 machine hours The following data are for the production of singles batches of two products, Mirlite and Subdue: Mirlite Subdue Gallons produced $60,000 25,000 Direct labor hours 400 250 Machine hours 800 250 Direct labor cost $10,000 $7,500 Direct materials cost $360,000 $150,000 Setup hours 15 12 Materials moves 60 35 Required Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC.
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.
| E5-4A | Stage Two ABC for Manufacturing | |||||||||
| Assume The Sherwin-Williams Company, a large paint manufacturer, has determined the following activity cost pools and cost driver levels for the latest period: | ||||||||||
| Activity Cost Pool | Activity Cost | Activity Cost Driver | ||||||||
| Machine setup | $900,000 | 2,500 setup hours | ||||||||
| Materials handling | 820,000 | 4,000 materials moves | ||||||||
| Machine operation | 400,000 | 20,000 machine hours | ||||||||
| The following data are for the production of singles batches of two products, Mirlite and Subdue: | ||||||||||
| Mirlite | Subdue | |||||||||
| Gallons produced | $60,000 | 25,000 | ||||||||
| Direct labor hours | 400 | 250 | ||||||||
| Machine hours | 800 | 250 | ||||||||
| Direct labor cost | $10,000 | $7,500 | ||||||||
| Direct materials cost | $360,000 | $150,000 | ||||||||
| Setup hours | 15 | 12 | ||||||||
| Materials moves | 60 | 35 | ||||||||
| Required | ||||||||||
| Determine the batch and unit costs per gallon of Mirlite and Subdue using ABC. |
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