ABC employs a job-order costing system, with overhead calculated based on direct worker hours. Management predicted that 125,000 direct labour hours would be worked and RM450,000 in manufacturing overhead expenditures would be incurred at the start of the year. The company performed 130,000 direct labour hours during the year and incurred the following manufacturing costs: RM Direct materials used in production 380,000 Direct labor 400,000 Indirect labor 95,000 Indirect materials 67,500 Insurance (30% for factory assets) 30,000 Utilities (60% used for production) 42,000 Repairs and maintenance (100% for factory assets) 25,000 Depreciation on machine used in production 105,000 Depreciation on fixed assets in corporate block 78,000 Determine the amount of under-applied or over-applied overhead for the year.
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.
ABC employs a
The company performed 130,000 direct labour hours during the year and incurred the following
| RM | |
| Direct materials used in production | 380,000 |
| Direct labor | 400,000 |
| Indirect labor | 95,000 |
| Indirect materials | 67,500 |
| Insurance (30% for factory assets) | 30,000 |
| Utilities (60% used for production) | 42,000 |
| Repairs and maintenance (100% for factory assets) | 25,000 |
| 105,000 | |
| Depreciation on fixed assets in corporate block | 78,000 |
Determine the amount of under-applied or over-applied overhead for the year.
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