A company sells two types of products: standard and deluxe. It prepares the following analysis showing budgeted cost and cost driver activity for each of its three activities. Activity Budgeted Cost $ 104,400 $ 11,500 Activity Cost Driver Square feet Factory services Setup Setups Quality control $ 116,250 Units inspected Compute an activity rate for each activity using activity-based costing. Activity Factory services Setup Quality control Budgeted Cost $ 104,400 11,500 116,250 Budgeted Activity Usage Budgeted Activity Usage Deluxe 2,800 200 5,250 Standard 3,000 300 2,500 Activity Rate Total 5,800 500 7,750
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.
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![# Activity-Based Costing Analysis for a Company
A company sells two types of products: standard and deluxe. Below is an analysis that details the budgeted costs and cost driver activities for each of its three business activities. The goal is to compute an activity rate for each activity using activity-based costing.
### Table 1: Budgeted Cost and Cost Driver Activity
| Activity | Budgeted Cost | Activity Cost Driver | Budgeted Activity Usage |
|-------------------|---------------|----------------------|-------------------------|
| | | | Standard | Deluxe | Total |
| Factory Services | $104,400 | Square Feet | 3,000 | 2,800 | 5,800 |
| Setup | $11,500 | Setups | 300 | 200 | 500 |
| Quality Control | $116,250 | Units Inspected | 2,500 | 5,250 | 7,750 |
### Calculation Table
Compute the activity rate for each activity, which involves dividing the budgeted cost by the total budgeted activity usage.
| Activity | Budgeted Cost | Budgeted Activity Usage | Activity Rate |
|-------------------|---------------|-------------------------|----------------------|
| Factory Services | $104,400 | [To be filled] | [To be calculated] |
| Setup | $11,500 | [To be filled] | [To be calculated] |
| Quality Control | $116,250 | [To be filled] | [To be calculated] |
### Explanation
- **Factory Services**:
- The activity cost driver is measured in square feet.
- Calculate the activity rate by dividing the budgeted cost ($104,400) by the total square feet (5,800).
- **Setup**:
- The activity cost driver is the number of setups.
- Calculate the activity rate by dividing the budgeted cost ($11,500) by the total number of setups (500).
- **Quality Control**:
- The activity cost driver is the number of units inspected.
- Calculate the activity rate by dividing the budgeted cost ($116,250) by the total units inspected (7,750).
These activity rates will help the company allocate its budgeted costs more accurately based on actual usage by each product type (](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd910c100-dea7-4ec3-a3d4-d1fdec79783d%2Fd91d2fa3-06b7-4639-b5ba-75488d7289d5%2F499wmdj_processed.png&w=3840&q=75)
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