A company which uses a job order costing system charges its overheads to production on the basis of machine hours. At the beginning of the year 2010, the management estimated that the company would incur $170 000 in overhead costs for the year and work 85 000 machine hours. Assume that during the year the company actually works only 80 000 machine hours and incurs the following costs. Calculate the amount of over or under applied overheads Utilities 14, 000 Insurance 9,000 Maintenance 33000 Indirect materials 7000 Indirect labor 65,000 Direct materials 530000 Depreciation 40,000 Direct labor 85000
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 which uses a
Assume that during the year the company actually works only 80 000 machine hours and incurs the following costs. Calculate the amount of over or under applied overheads
Utilities 14, 000
Insurance 9,000
Maintenance 33000
Indirect materials 7000
Indirect labor 65,000
Direct materials 530000
Direct labor 85000
Step by step
Solved in 2 steps
