Academy allocates support dept costs to production departments befoe establishing predetermined overhead rates for use in product costing. Assembly uses machine hours as a base and expects to use 90,000 MH this year. Testing uses direct labor hours and expects to use 160,000 DLH this year. Academy allocates support dept. costs to Assembly and Testing before their pre-determined rate. Support costs are allocated to productive depts. based on time of service while IT costs are allocated based on IT hours. Dept EngSupport IT Assembly Testing Total Dept Overhead $ 2,000,000 $ 1,000,000 $ 3,000,000 $ 2,000,000 $ 8,000,000 Time of Service 40 50 700 450 1,240 IT Hours 1,000 2,000 9,000 11,000 23,000 A. Complete a cost allocation table using the step method. B. Calculate the predetermined overhead rates for the productive departments (Assembly / Testing).
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.
Academy allocates support dept costs to production departments befoe establishing predetermined
Assembly uses machine hours as a base and expects to use 90,000 MH this year. Testing uses direct labor hours and expects to use 160,000 DLH this year.
Academy allocates support dept. costs to Assembly and Testing before their pre-determined rate. Support costs are allocated to productive depts. based on time of service while IT costs are allocated based on IT hours.
| Dept | EngSupport | IT | Assembly | Testing | Total |
| Dept Overhead | $ 2,000,000 | $ 1,000,000 | $ 3,000,000 | $ 2,000,000 | $ 8,000,000 |
| Time of Service | 40 | 50 | 700 | 450 | 1,240 |
| IT Hours | 1,000 | 2,000 | 9,000 | 11,000 | 23,000 |
A. Complete a cost allocation table using the step method.
B. Calculate the predetermined overhead rates for the productive departments (Assembly / Testing).
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