A company makes two products—Product A and B. Data regarding the two products follow: Direct Labor-Hours per Unit Annual Production Product A 0.75 20,000 units Product B 0.50 50,000 units Additional information is as follows: Product A requires $15 in direct materials per unit, and Product B requires $8. The direct labor wage rate is $18 per hour. The company’s activity-based absorption costing system has the following activity cost pools: Activity Cost Pool (and Activity Measures) Estimated Overhead Cost Expected Activity Product A Product B Total Machine setups (number of setups) $ 100,000 145 255 400 Special processing (machine-hours) $ 200,000 3,500 4,500 8,000 General factory (Direct labor-hours) $ 150,000 15,000 25,000 40,000 Using activity-based absorption costing, the unit product cost for Product B is closest to:
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.
A company makes two products—Product A and B. Data regarding the two products follow:
| Direct Labor-Hours per Unit | Annual Production | ||
|---|---|---|---|
| Product A | 0.75 | 20,000 | units |
| Product B | 0.50 | 50,000 | units |
Additional information is as follows:
- Product A requires $15 in direct materials per unit, and Product B requires $8.
- The direct labor wage rate is $18 per hour.
- The company’s activity-based absorption costing system has the following activity cost pools:
| Activity Cost Pool (and Activity Measures) | Estimated |
Expected Activity | ||
|---|---|---|---|---|
| Product A | Product B | Total | ||
| Machine setups (number of setups) | $ 100,000 | 145 | 255 | 400 |
| Special processing (machine-hours) | $ 200,000 | 3,500 | 4,500 | 8,000 |
| General factory (Direct labor-hours) | $ 150,000 | 15,000 | 25,000 | 40,000 |
Using activity-based absorption costing, the unit product cost for Product B is closest to:
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